SYDNEY (Reuters) - Voters in Australia's most populous state on Saturday delivered a crushing defeat to Prime Minister Julia Gillard's Labor party, handing power to the conservative opposition in a landslide, analysts said.
Gillard's government holds a one-seat majority in the national parliament thanks to independents and Green MPs and her standing will be jolted by the election loss in New South Wales.
Prominent Australian Broadcasting Corporation (ABC) analyst Antony Green, writing in a blog, said the conservatives had won enough seats to take control of the state legislature.
Early returns showed Labor could retain as few as 16 of 93 seats in the lower house, a swing of 17 percent state-wide. Opposition leader Barry O'Farrell is set to become the first conservative premier for 16 years.
The opposition will now run three of Australia's six states, including the two most populous -- New South Wales and Victoria -- as well as Western Australia, its resource base.
But whatever difficulties Gillard faces in national terms, analysts said the long-term impact of the outcome on Labor may be limited.
The election was largely fought on local issues and allegations of corruption and poor management by successive Labor governments in the state.
Support for Gillard's government in opinion polls fell to record lows over plans to put a price on carbon pollution, though the ratings have rebounded since she floated the prospect of compensation.
Gillard may hope that voters are voicing their frustrations now in New South Wales and will be more forgiving when she next has to go the polls nationally in two years.
Norman Abjorensen, an analyst at the Australian National University, said the latest result could prove a blessing to the prime minister if it puts the worst damage to the party "brand" behind her.
"The people here are passing a judgment based very much on transport problems, congested cities," he told Reuters. "In a sense the federal Labor government will be better off."
(Editing by Ron Popeski)