NSW Premier Chris Minns faces the prospect of minority government but has ruled out doing deals with independent MP Gareth Ward if he clings on to his south coast seat of Kiama.
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While Liberal gains in key seats have dampened Labor's hopes for a majority government, the interim Minns ministry took the reins of government at a small ceremony at Government House on Tuesday.
Labor needs 47 seats to have a lower house majority but was stuck on 45 as the coalition pushed ahead in eight seats still in doubt.
Liberal candidates leapfrogged Labor's early leads in Goulburn, Terrigal, Winston Hills, Holsworthy and Miranda on Monday.
As counting continued in the tightly-contested race for Kiama, the premier flatly ruled out doing deals with the incumbent.
Mr Ward pleaded not guilty to historical sexual and indecent assault offences when he appeared in Nowra District Court on Tuesday.
The former Liberal minister, was dumped from the party and suspended from parliament last year after being charged.
Labor's early lead in Kiama was slipping on Tuesday with ABC's chief election analyst Antony Green predicting Mr Ward will likely retain the seat.
"We're not going to negotiate with him at all," Mr Minns told reporters.
"I want to wait and see what the outcome of the ballot is. We're still very hopeful and I think in the commanding position to win that seat."
Mr Minns also sent a pointed message to the crossbench about his style of governance.
"If we were in minority and minor parties in the crossbench were prepared to support Labor, we are happy to accept that support," he told reporters in western Sydney.
"But we wouldn't be doing any more horsetrading or any deals and we haven't."
Mr Minns was speaking after a team of eight Labor frontbench MPs were sworn in at Government House.
The enormity of the occasion showed on the 43-year-old premier's face as he raised his eyebrows at wife Anna after taking his oath.
"We don't know the final composition of the next parliament but my team and I are ready to hit the ground running," he said.
"We know there's a huge responsibility on our shoulders and work starts today."
Prue Car is the second woman to become deputy NSW premier after Carmel Tebbutt, while also taking the education and early learning portfolio.
Daniel Mookhey is treasurer, former opposition leader Michael Daley is attorney-general, Jo Haylen has the transport portfolio while Penny Sharpe is environment and heritage minister.
Ryan Park is health minister while John Graham has responsibility for roads, arts, and is special minister of state.
The full ministry is expected to be sworn in next week once the parliament's final make-up is clear.
Another potential seat was shaved from Labor's column late on Monday, as the party's candidate for Balmain Philippa Scott conceded to new Greens MP Kobi Shetty.
Labor remains about 230 votes ahead as counting continues in Ryde.
Mr Minns first act as premier was to announce a clinical-led task force to slash public hospital surgery wait lists.
About 100,000 people, including 4000 children, are waiting for elective surgery in NSW, with one in six waiting longer than clinically recommended.
"They are in pain and discomfort," Mr Minns said.
"We're hitting the ground running to help the people who help us."
The incoming government was given a political boost when a trio of independents - Alex Greenwich, Greg Piper and Joe McGirr - promised confidence and supply, if Labor cannot form a majority.
Early counts show Labor will win eight seats in the upper house, the coalition six, the Greens two, and one seat for One Nation.
Remaining votes and preference flows will decide the last four seats that were up for election.
Australian Associated Press
