The Liberal National Party has won the federal seat of Fadden with LNP candidate Cameron Caldwell claiming victory in the Queensland electorate.
Mr Caldwell, a Gold Coast City councillor, said he was "honoured and humbled" and looked forward to supporting Opposition Leader Peter Dutton to become Prime Minister.
"We are on the right path as a party," he told an enthusiastic Liberal Party gathering following the result on Saturday.
"We have a great leader and we will return to government."
Just two hours after polling booths closed, with the LNP recording a firm lead in early counting, Labor candidate Letitia Del Fabbro called her opponent to concede.
“We knew this would be an uphill battle,” Ms Del Fabbro said.
"It has though sent an important message to the LNP to not take the Gold Coast for granted."
With just over half of the ballots counted by 9pm, Mr Caldwell was leading with roughly 45 per cent of the primary vote compared to Labor’s 21 per cent.
The LNP was recording a more than 4.5 per cent swing to it which is a common trend for oppositions in by-elections.
The Greens, who were experiencing an almost five per cent swing against them, were being outstripped in the primary vote both by One Nation and the Legalise Cannabis Australia party.
Mr Caldwell, who will replace former coalition minister Stuart Robert in the northern Gold Coast seat, said cost of living was the main issue for voters.
Asked earlier on Saturday if Mr Robert's involvement in the robodebt scandal that engulfed the previous Liberal-Nationals federal government would impact voters, Mr Caldwell said they had other things on their minds.
"Those are issues that are really starting to bite in their households and it's whether people can put food on the table and keep the lights switched on," he told Sky News.
"That's really what's on their mind as they walk into the polling booth today."
Mr Dutton also blamed the government for failing voters on cost of living and energy.
"The people of Fadden are like other people right across the country in marginal seats in outer metropolitan areas," he said.
"People are hurting at the moment and the Labor economic experiment is failing Australians."
Labor frontbencher Murray Watt remained positive despite the loss.
"We knew heading into this that we weren't going to win this seat, but it wasn't what it was about," he said.
"It was about getting people in Fadden and the Gold Coast a choice as to who they voted for."
Labor had tried to use this to bolster its candidate Ms Del Fabbro, who said earlier on Saturday any swing to the party would be a blow to the coalition in one of its safest seats.
Ms Del Fabbro, who was contesting the seat for the second time, was credited with whittling down Mr Robert's margin from 11.2 per cent to 10.6 per cent at the 2019 federal election.
She agreed cost of living issues had dominated the campaign, although there was also interest in the robodebt scandal and the Indigenous voice to parliament.
Treasurer Jim Chalmers said the average swing against a government in a by-election was about four per cent so anything less would be embarrassing for Mr Dutton.
Labor has won Fadden only once - in 1983 under the election of the Hawke government.
A total of 13 people contested the by-election including Australian Democrats and Indigenous - Aboriginal Party of Australia candidates and several independents.
