Australian Prime Minister Julia Gillard on Wednesday signed an agreement with the Australian Greens, which secures their support for a Labor minority government.

"I think the fact that we were able to reach that agreement shows that we have worked in good faith and held good discussions, " Gillard said in a media conference in Canberra on Wednesday.

In what was a widely expected move, new Australian Greens Member of Parliament (MP) Adam Bandt signed the deal with Prime Minister Julia Gillard in her Parliament House office on Wednesday morning. They were joined by Deputy Prime Minister Wayne Swan, Greens leader Bob Brown and his deputy Christine Milne.

"The Greens will ensure supply and oppose any motions of no- confidence in the government from other parties or MPs," Greens' Leader Bob Brown said at a media conference in Canberra.

"Labor will work with the Greens to deliver improved transparency and integrity to parliament."

In return for Bandt's support, Gillard has offered to set up a climate change committee to consider a price on carbon, immediate reform to political donations, a full parliamentary debate on Afghanistan, a leaders debate commission and agreement on a private members' bill to debate above-the-line voting.

The Greens also secured an agreement from the Labor Party to hold referenda on constitutional recognition of indigenous Australians and on recognition of local government.

According to ABC Network, when parliament is sitting, the prime minister will meet Greens leader Bob Brown and their lone lower house MP Adam Bandt each week to work on the legislative agenda.

The deal does not include a cabinet position for a Green, nor will there be a conscience vote on gay marriage as the two parties could not reach agreement on the issue.

Responding to the Greens-Australian Labor Party (ALP) alliance agreement, Opposition Leader Tony Abbott said the deal showed there was no election commitment Gillard would not dump to hold onto power in Parliament.

"Julia Gillard has broken her first election commitment," Abbott told a media conference in Canberra on Wednesday afternoon. "The citizen's assembly (on climate policy) was always a dud policy and now it has been junked at the direction of the Greens. Clearly the Greens will be in the drivers seat in any renewed Gillard government.

"There will be a carbon tax, there will be a mining tax, there will be funding cuts for independent schools and there will never be offshore processing (for asylum seekers)."

Abbott accused the two parties of doing a deal before the election, and said many of the promises Gillard had made to Greens Leader Bob Brown were already Coalition policy.

"There was a deal..which they clearly weren't up front about."

However, Gillard later rejected the claims saying that Labor's agreement with the Greens did not mean the parties had formed a coalition.

"It's completely wrong, completely wrong on the face of the agreement," she said, adding that the terms of the agreement clarified and specified the right of Melbourne Greens MP Adam Bandt and the Greens senators to vote as they wished.

The Australian newspaper later said despite the Greens-Australian Labor Party deal struck, the fate of Australia's next prime minister still lies with the independents.

The deal with the Greens means Labor is now three seats short of the 76-seat majority it needs to form government.

Meanwhile, the three independents Bob Katter, Tony Windsor and Rob Oakeshott, who also holds balance of power in Parliament to decide which party to form minority government, on Wednesday revealed that their decision on which side of politics to support could take as long as until next Tuesday.