The election result remains too close to call with Labor's chances of winning government fading in a shock result.
Despite former Liberal prime minister Tony Abbott being ousted, the Coalition has performed far better than the polls predicted, while Labor has failed to pick up seats it was targeting.
Labor MP Anthony Albanese conceded he expected the party to be doing better at this stage.
Supporters watch the tally count at the Federal Labor Reception in Melbourne. Source: AAP
"There's no point gilding the lily," Mr Albanese told Channel 9.
"We have a government that's voted no confidence in itself - we've had three PMs in five years - we have a government and I don’t know what their agenda will be. So I did expect that we would be doing better at this stage of the evening."
The mood in the Labor Party function in Melbourne has faded from upbeat optimism early in the night with supporters now tense and subdued.
Retiring Liberal veteran Christopher Pyne said the Coalition was not considering the prospect of forming a minority government yet.
"I think there is a good chance that we can form a government... which is a very far cry from where we started the night," Mr Pyne told Channel 10.
The Coalition's optimism comes even after suffering a major blow in Warringah with the loss of former prime minister Tony Abbott to independent Zali Steggall.
Mr Abbott suffered a huge swing against him of almost 14 per cent, according to the Australian Electoral Commission.
In his concession speech, Mr Abbott focussed on the better-than-expected overall result for the Coalition.
"What's best for the country is not so much who wins or loses Warringah, but who forms, or does not form, a government in Canberra," Mr Abbott told his supporters.
"And tonight we can be extraordinarily confident, more confident than we ever had any right to expect, that we will have continued good Liberal-National government."
Elsewhere, the Coalition has performed strongly and is on track to pick up several seats in Queensland and Tasmania, while Labor has failed to win some of its target seats in New South Wales.
Senior Liberal MP Peter Dutton will hang on to his marginal seat of Dickson with a swing towards him.
The LNP’s Phillip Thompson is predicted to beat Labor’s Cathy O’Toole to take the Queensland seat of Herbert.
Among seats too close to call are former prime minister Malcolm Turnbull's electorate of Wentworth in Sydney where the Liberals' Dave Sharma is hoping to reclaim it from independent MP Kerryn Phelps.
Treasurer Josh Frydenberg will retain Kooyong in Melbourne, despite a swing against him.
In Tasmania, early results show a swing against Labor in two key seats with incumbent Justine Keay trailing the Liberals' Gavin Pearce in Braddon and Labor MP Ross Hart behind in Bass.
An exit poll, commissioned by Channel Nine, predicts a Labor victory with a swing away from the government of 2.4 per cent.
The YouGov Galaxy poll suggests Labor could claim as many as 80 seats.
Labor's Penny Wong said they were "reasonably optimistic" of winning the popular vote.
But Senator Wong told the ABC it will come down to individual seat contests.
"There will be a lot of regional variation, a lot of particular seat by seat contests which are going to be very important and I suspect we will see different swings in different parts of Australia and in different seats."
Liberal Senator Arthur Sinodinos said the Liberals were "hoping for the best, but bracing for potential losses".
Both sides need to pick up seats to claim the necessary 76 seats to form government.
After a redrawing of the electoral boundaries which saw the House of Representatives gain an extra seat, the Coalition heads into the election with a notional 73 seats compared to Labor's 72 seats.
'Shake up'
Both leaders campaigned right up until the close of polls with Mr Morrison starting the day in Tasmania before voting in his home electorate in Sydney's Sutherland Shire.
"This community means the world to me," he told reporters after casting his ballot, flanked by wife Jenny and daughters Abbey and Lily.
He refused to speculate on his future as leader of the party if the Coalition loses.
A confident Mr Shorten was handing out how-to-vote cards at his local polling booth in the Melbourne seat of Maribyrnong, before voting himself.
"We will shake up politics and get on with climate action," the opposition leader told one supporter.
Labor deputy leader Tanya Plibersek said the party, which went into the election with 69 seats, had "high hopes" to pick up 12 seats it had been targeting.
"I feel positive. I feel like we are ahead but I am more cautiously optimistic than confident," she said.
Former Liberal deputy leader Julie Bishop, who retired at this election, said there was a "path to victory" for the coalition and it would be a "night of surprises".
Deputy Prime Minister Michael McCormack said he was "quietly confident".
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