Australia's Prime Minister John Howard says he is "humbled" after winning a fourth term in office.
Mr Howard has won a fourth consecutive term in office
With 70% of the votes counted in Saturday's election, results indicate Mr Howard's Liberal-National coalition has won an easy majority over Labor.
While the election was largely fought on domestic issues, it was also watched abroad because of divisions over Iraq.
Mr Howard supported the war, but his rival Mark Latham had pledged to bring Australian troops home if he won.
In the United States, President Bush congratulated "my good friend Prime Minister
John Howard, who won a great victory".
In claiming victory, a beaming Mr Howard told his supporters: "I am truly humbled by this extraordinary expression of confidence in the leadership of this great nation by the coalition."
In winning his fourth successive term, Mr Howard is on track to become Australia's second-longest serving leader after Robert Menzies, Mr Howard's political hero.
Gains for Howard
Opinion polls before the election predicted that the outcome would be close, but as soon as the first results came in, it was clear that Mr Latham's chances did not look good.
He lost two seats in Tasmania, and failed to make up the ground as votes came in from other parts of the country.
PREDICTED LOWER HOUSE SEATS
Lib-Nat coalition: 87 (+ 5 from previous election)
Labor: 60 seats (- 2)
Independents: 3 seats (- 1)
[Figures from ABC computerised predictions]
Computer projections suggest Mr Howard's coalition could win 87 seats out of a total of 150 up for grabs in the lower House of Representatives, a five-seat increase from the outgoing parliament.
The Liberal-National partnership also looks set to gain ground in the 76-member Senate, where Labor and its allies previously held a majority.
"Tonight was not our night," Mr Latham told a crowd of Labor supporters at his constituency in suburban Sydney.
But he vowed to fight on, saying: "I have had a lot of people say that we have made the opposition strong, and when there is a strong opposition, Australian democracy
is so much stronger."
Voting is compulsory in Australia, and people from all walks of life turned out to cast their ballots on Saturday.
One man in Sydney even cast his vote wearing just a swimming suit, and then walked straight back to the beach.
Mark Latham said: 'Tonight was not our night.'
Mr Howard voted in the Sydney suburb of Bennelong, where he faced a handful of demonstrators shouting "Liar, liar".
Mr Latham also voted in Sydney. Despite the later disappointment, he started his day on a positive note, winning a local raffle. His prize was a tray of meat.
"It's good to be a winner at 1030 on Saturday," he joked.
Both candidates made the economy a central issue to their campaigns, vowing to keep interest rates low and the budget in surplus.
Mr Howard has presided over a period of great prosperity, and voters appear to have thought that Mr Latham was too inexperienced, and could jeopardise the country's booming economic performance, according to the BBC's correspondent in Sydney, Phil Mercer.
The issue which gained most international attention was the war on Iraq.
John Howard's conservative government vowed to keep Australia's 850 troops in the Gulf indefinitely, while Mr Latham said he would withdraw them by Christmas.