KEY POINTS:
Labor leader Kevin Rudd will become the new Prime Minister of Australia with Labour having won won at least 81 seats in the 150-seat House of Representatives.
With about two thirds of the votes counted Labor appears to have gained 21 seats in a 6.3 per cent swing.
Prime Minister and Liberal leader John Howard may be dealt a double blow with journalist Maxine McKew leading in Bennelong.
It may be decided by 5000 special votes.
Australia will also have its first woman deputy Prime Minister with industrial relations shadow minister Labor deputy leader Julia Gillard expected to take the role.
Queensland-based Rudd has been an MP since 1998 and is a Mandarin speaking former diplomat.
Howard's career will be over if he did win Bennelong on special votes and is expected to resign as leader.
Treasurer Peter Costello was expected to take over but he may now be challenged by Malcolm Turnbull, the outgoing Environment Minister.
Rudd, aged 50, has been Labor leader for only 12 months. Labor has changed leaders five times since 1996 when Howard ended the the party's 13-year hold on power.
The key planks of Rudd's campaign were signing up to the Kyoto protocol on climate change, withdrawing troops from Iraq, and abolishing the Coalition's Workchoice labour law reforms.
Howard is watching the results unfold at his Sydney home. He is expected at the Wentworth Hotel where Liberal Party members have started to gather.
Election day
It's election day in Australia and it's going to be a momentous day for John Howard either way, but especially if he wins for a fifth term after trailing Labor's Kevin Rudd all year.
It may be a case of Lazarus with a triple bypass (as he described himself once), on Viagra.
Howard has looked indomitable in the past few days in contrast with his harried and defensive appearances earlier in the past week. His class as a veteran campaigner emerged only in the dying days of the campaign.
Rudd sounded more robot with each passing interview but Labor's has been the most impressive campaign, tight and focused if over-sanitised.
Fran O'Sullivan in the Weekend Herald pays tribute to Howard and sets outs why New Zealand has cause to celebrate his leadership even if it it is "Howard's end".
Most political commentators here are predicting a close Labor victory.
That is on the basis of another poll due out today, The Australian's Newspoll.
It is a replica of the surprise Galaxy one yesterday narrowing Labor's lead over the Coalition to just 4 points - 52 per cent to Labor and 48 per cent to the Coalition. Another reputable poll puts Labor's lead at 14 points.
But unlike New Zealand, it's the number of electorate seats and not the percentage of votes that will determine the Government.
And it is possible that Labor could again win more of the total vote nationwide but not win most of the seats, as occasionally happened in New Zealand before MMP.
The last time that happened in Australia was in 1998 under Kim Beazley. The other times were in 1990, 1969, 1961 and 1954.
It's a wonder that there has not been a greater movement in Australia for a proportional system like MMP, for which my respect has grown enormously in the past week.
It is not just the fact that the system makes the votes in marginal electorates more important than another and that parties skew their campaigns accordingly, it's that it leads to borderline corruption.
It was claimed on the 7.30 Report current affairs show this week that the bellwether seat of Eden-Monaro in New South Wales - whose local MP has changed with Government changes for 35 years - has had $100 million of federal grants dispensed in the past three years.
I don't know if it is true but it wasn't disputed by the sitting MP.
And the Auditor General issued a damning report last week over such largess to marginal seats in under a regional grants programme.
I'm leaving Canberra this morning for Sydney. Tonight I'll be at the Wentworth Hotel, Howard's headquarters, where I will witness either the end of a remarkable era, or one of the most amazing comebacks in politics.
Australia election day update:
Am back in Sydney now where the rain has eased off. Here are a couple of links to National billboard-style ads running on election day. Over here they stop TV and radio political advertising from midnight Wednesday but newspaper and online ads are allowed to run right up to when the booths close tonight. (You can tell where the election booths are - they are the buildings dripping in party bunting.)
The Weekend Australian's front page www.theaustralian.news.com.au/ has been running for several hours - on the right of the page - the very clever black and white ad identical to the one that ran on television and which surely must be modelled on National's stark billboard ads. Having said that it has just changed to a coffee add. Let's hope it returns.
Then here is the Liberal Party YouTube site www.youtube.com/LiberalParty07 with not only John Howard's last YouTube election broadcast, fresh today, but to the right of it the Liberals' spoof on Labor's black and white ads.
