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Conservative challenger Tony Abbott declared Australia "under new management" Saturday after Prime Minister Kevin Rudd conceded election defeat and said he will step down as Labor leader.
With 88 percent of the vote counted, the Australian Electoral Commission said his Liberal/National coalition was heading for a landslide win, leading in 89 seats in the 150-seat House of Representatives, to Labor's 56.
Abbott, a former trainee Catholic priest, boxing enthusiast and monarchist, capitalised on the infighting that saw Rudd oust Julia Gillard as Labor leader in June, three years after she did the same to him.
"I declare that Australia is under new management and is once again open for business," the jubilant 55-year-old told cheering supporters at a luxury hotel in Sydney.
"I now look forward to forming a government that is competent, that is trustworthy, and which purposefully and steadfastly and methodically sets about delivering on our commitments to you, the Australian people.
"I am both proud and humbled as I shoulder the duties of government," he added. He is expected to be sworn in officially by Governor General Quentin Bryce next week.
Best known as a political hard man of the Liberal Party, unafraid of speaking his mind and occasionally tripping up on a gaffe, he has rebuilt his image and ran what was widely seen as a disciplined election campaign.
He made a paid parental leave scheme his "signature" policy, while pledging to scrap the carbon tax and make billions of dollars of savings to bring debt down.
Rudd said Labor had "fought the good fight", conceding defeat some 100 minutes after the polls closed.
He mounted the stage in a function room at the Gabba cricket ground in Brisbane to wish his rival well in the "high strain" lifestyle that comes with prime ministership.
"As prime minister of Australia, I wish him well in the high office of prime minister of this country," he said, adding that he will quit as party leader.
"I will not be recontesting the leadership of the parliamentary Labor Party. The Australian people I believe deserve a fresh start with our leadership."
Employment and Workplace Relations Minister Bill Shorten is seen by the Australian media as favourite to take over.
Others in the running could be deputy leader Anthony Albanese, Treasurer Chris Bowen and Immigration Minister Tony Burke.
Health Minister Tanya Plibersek said Labor had only itself to blame for defeat.
"The clear take-out from this definitely is that disunity is death and we are not disciplined enough," she said.
Former Labor prime minister Bob Hawke, who won four successive elections in the 1980s and 90s, said personality politics had been allowed to overtake the party's message and policies.
"The personal manipulations and pursuits of interest have dominated more than they should and in the process the concentration on values has slipped," he told Sky.
"I really believe this was an election that was lost by the government rather than one that was won by the opposition."
Rudd struggled for traction after toppling Gillard, Australia's first female prime minister, in a bitter party room coup just weeks before calling the election.
He earlier cast his ballot in a Brisbane church, where he was met by a group of noisy refugee advocates who yelled at him about Labor's mandatory detention of asylum-seekers who arrive by boat.
A relaxed Abbott, running as opposition leader in his second election, cast his vote at Freshwater Surf Club in Sydney, along with wife Margie and his three adult daughters.
Rudd, also 55, campaigned on his administration's success in keeping Australia out of a recession during the global financial crisis.
He also promised to scrap the carbon tax brought in by Labor after the 2010 election and move to a carbon emissions trading scheme by July 2014.
Other key policies included a plan to introduce a bill in parliament to legalise gay marriage and the adoption of tough measures to halt asylum-seeker boats.
Capitalising on Labor's fragmenting base was eccentric billionaire Clive Palmer, best known for building a replica of the Titanic, who polled strongly in his native Queensland and was on track to win a seat and take more than five percent of the vote nationwide.