Labor has lost its hold on the national two-party preferred vote, one of the key elements Julia Gillard has relied on to argue her party has the better right to form a minority government.
Late last night, Labor's two-party lead had dramatically turned into a deficit of about 1900 votes - with nearly 10.7 million counted.
The Coalition now leads on both the primary and two-party vote.
Last week, when Labor held a healthy lead in the popular vote, Ms Gillard argued this gave her party superiority in the quest to form government.
The Australian Electoral Commission figures are constantly changing, and the latest fluctuation came after the commission removed eight seats from the two-party tally on the basis that neither of the major parties were not both in first and second position.
One of the four independents holding the nation's future in his hands condemned both the main parties as he warned he might not support either when he announces his decision in coming days.
Andrew Wilkie, the Tasmanian independent who met Julia Gillard and Tony Abbott yesterday, decried both parties as one of Ms Gillard's signature claims to retaining power - a superior two-party-preferred vote - disappeared.
Mr Wilkie released a list of 20 ''priorities'' that would cost billions of dollars to implement and said both parties had to do more to win his support.
''I note that in the last few months, the Labor government has been neither stable, competent or ethical, and I'm yet to be persuaded that the opposition can do any better,'' he said.
Both sides consider Mr Wilkie crucial in generating momentum because he will decide as early as tomorrow, while the other three - Tony Windsor, Bob Katter and Rob Oakeshott - will not decide until the end of the week at the earliest.
Last night the rural trio met Ms Gillard and Mr Abbott.
Ms Gillard, who will make another public pitch today at the National Press Club, presented them with Labor's plan to reform Parliament and crack down on political donations and advertising, as they requested.
With negotiations reaching the critical stage, demands flowed thick and fast.
The West Australian National Tony Crook stressed he was independent and not part of the Coalition. He attended a Nationals party room meeting in Canberra and, in return for his support, demanded $860 million in royalties be funnelled to WA each year, plus more GST revenue.
Without Mr Crook's support, Mr Abbott's Coalition can lay claim to only 72 seats.
The Green, Adam Bandt, has pledged to support Labor, giving it 73 seats. A majority of 76 is needed.
Mr Wilkie said renovations to Royal Hobart Hospital and betting limits on poker machines were his main demands. He said both leaders had been ''receptive''. He said a humane asylum-seeker policy was paramount. He said he did not like the Liberals' hardline policy approach and Labor's was not much better.
His priority list, which he stressed were not demands, included infrastructure projects for Tasmania, worth an estimated $2 billion, increased pensions and other welfare payments, a publicly funded dental scheme and a conscience vote on gay marriage.
The Nationals, who have been shut out of negotiations with the independents, flexed their muscles by holding a party room meeting to show off their 12 MPs and six senators, an increase of four in total.
The relationships between the Nationals and the independents, especially Mr Katter, are poisonous but the Nationals leader, Warren Truss, believed this to be surmountable for the good of the nation.
Phillip Coorey is the chief political correspondent for The Sydney Morning Herald.
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