"I can formally say that Bennelong is now a Labor seat for the first time."
The majority of postal and absentee votes had to be collated before McKew's victory could be announced, but as ballots were received last week Howard said he was "very unlikely" to keep his seat.
McKew marginally led Howard all week, with neither willing to assert victory or defeat.
Howard had held the Bennelong seat for 33 years and has been the prime minister for 11 years.
He becomes the first Australian prime minister in 78 years to be dropped by his constituency, and only the second in history.
Thirty years in public life
McKew said that she was not disappointed that Howard had not given up the seat, adding that he would have been very busy this week clearing out his official residences.
|"He gave 30 years to public life and that should be acknowledged"|
Maxine McKew on John Howard
"I would like to acknowledge John Howard's long years of public service," she said.
"He gave 30 years to public life and that should be acknowledged."
Rudd had anticipated McKew's victory, including her position as parliamentary secretary to the prime minister in his government line-up on Thursday.
Howard has been criticised for attempting to hold on to power for too long, rather than giving party leadership to long-serving treasurer Peter Costello before the elections.
The election was said to be lost on domestic issues, with workplace laws and rising interest rates acting against Howard.
Rudd has also promised to take Australian troops out of Iraq and sign the Kyoto Protocol on climate change.
The Liberal Party has now elected Brendan Nelson, the former defence minister, as its new leader.
Howard has made few public comments since his government was voted out of power, and has been photographed rarely.