UPDATED: Malcolm Turnbull says he will lead a “thoroughly Liberal Government” driven by “freedom, the individual and the market” as he sets about trying to heal deep divisions within Government ranks and restore the Coalition to a winning poll position.

Turnbull has become Australia’s Prime Minister-in-waiting, defeating Tony Abbott in a party room ballot 54 votes to 44.

Abbott’s deputy Julie Bishop has kept her job after telling him he had lost her support, easily accounting for Kevin Andrews 70 votes to 30.

Turnbull said he assumed parliament would run its full term before he tested his leadership at a general election.

“This has been a very important, sobering experience today (and) I’m very humbled by it,” he told reporters shortly after the ballot, reflecting on the “great honour and responsibility”.

“We need to have, and will have now, an economic vision; a leadership that explains the great challenges and opportunities that we face…and does so in a manner the Australian public understands,” he said.

He paid tribute to Abbott’s achievements, particularly the recent Free Trade Agreement negotiations, in a manner at odds with his scathing rhetoric when he launched his shock leadership bid on Monday afternoon.

But he reflected “there are few things more important in any organisation than its culture”.

“The culture of our leadership will be one that’s thoroughly consultative,” he said, maintaining his would be a “thoroughly traditional cabinet government”.

Bishop signalled she would remain as Foreign Minister, having retained the deputy leadership of the party after eight years in the role.

The stunning coup has seen Abbott ousted from office after just two years, a record shorter than either of his Labor predecessors, Kevin Rudd and Julia Gillard, whose bitter infighting proved such a boon to his tenure as Opposition Leader.

After the ballot, Gillard tweeted her congratulations to Turnbull, saying the role of Prime Minister was “a great honour and responsibility”.

Abbott had earlier resolved to fight on, arguing that the Liberal Party must not emulate the leadership crises of the previous Labor administration.

“This country needs strong and stable government and that means avoiding at all costs Labor’s revolving door of leadership,” said Abbott before the ballot.

“I will be a candidate, and I expect to win.”

Abbott said he had been “dismayed” by the destabilisation of his leadership by Liberal MPs over the past several months.

“The destabilisation just has to stop,” said Abbott.

“I firmly believe that our party is better than this, our Government is better than this, and, by God, our country is better than this.”

He was ambushed as Turnbull made his move, telling media in Canberra that Abbott “has not been capable of providing the economic leadership our nation needs”.

“It is not the fault of individual ministers,” he said in a stunning broadside, arguing it was time for a new style of leadership.

“We need advocacy, not slogans,” he said.

“We need to respect the intelligence of the Australian people.”

Turnbull, who resigned as Communications Minister before the ballot, railed against “captain’s picks” in a scathing assessment of Abbott’s leadership.

“Few would say that the cabinet government of Mr Abbott bears any resemblance (to that of the Howard Government),” he said, suggesting that Labor would inevitably win the next election if the Coalition’s polling woes continued.

“We have lost 30 Newspolls in a row,” he said.

“The people have made up their mind about Mr Abbott’s leadership…every month lost is a month of lost opportunities.”

His leadership will face its first test at this weekend’s Canning by-election in WA.

“This is an important by-election and I recognise that dealing with this issue (at this time) is not ideal,” said Turnbull.

However, he continued, “if we were to wait … we will get no clear air” and “from a practical point of view a change of leadership will improve our prospects in Canning”.

Treasurer Joe Hockey told reporters that Abbott had his “absolute loyalty”, criticising Turnbull for making “unfounded claims” about the Government’s economic management.

“The Prime Minister has my absolute loyalty as I have his,” said Hockey.

“We cannot and we must not make the same mistakes of the Rudd and Gillard years. The position of Prime Minister is a gift of you, the Australian people…you have the right to hire, only you have the right to fire.”

Hockey attacked Turnbull, citing “the disloyalty of some”.

Joe Hockey says his loyalties lie with Prime Minister Tony Abbott. AAP Image/Lukas Coch

“Mr Turnbull made a number of claims about economic leadership that are completely unfounded,” said Hockey.

“He has never said to me or to the Cabinet that we are heading in the wrong economic direction.

“We’ve improved the budget bottom line by $50 billion and negotiated three new free trade agreements.”

Hockey is now expected to be dumped as Treasurer, with Scott Morrison his mooted replacement.

Malcolm Turnbull announcing his candidacy to be Prime Minister this afternoon. AAP Image/Lukas Coch

Abbott was in SA this morning to announce a funding partnership with the Weatherill Government for the Northern Connector motorway.

Earlier this evening Opposition Leader Bill Shorten said nothing significant will change about the Federal Government if Malcolm Turnbull becomes Prime Minister.

Shorten told a press conference that “changing the leader of the Liberal Party changes nothing”.

“Malcolm Turnbull is right that Australia has been going nowhere for the last two years with this chaotic, divided, dysfunctional Liberal Government.

“Malcolm Turnbull is wrong when he says he is part of the solution.

“This is a minister who has presided over a slower, second-rate National Broadband Network (NBN) whilst managing to double the cost of the NBN.

“With Malcolm, it will aways be about Malcolm…he’s ambitious for himself not the nation.

“Australia does not need another out of touch leader.”

However, conservative voices have now suggested Shorten himself will be the next to face a leadership ballot. News Corp media mogul Rupert Murdoch tweeted after the ballot he was “sad to see such a decent man as Abbott toppled”.

“Now Turnbull needs a November election before Labor sacks Shorten,” Murdoch wrote.

Bill Shorten in parliamentary Question Time last week. AAP Image/Lukas Coch

Nationals leader and Deputy Prime Minister Warren Truss said before the party room showdown the coalition agreement would have to be renegotiated in the event of a Turnbull leadership.

He said his party had endorsed Abbott to continue as Prime Minister, adding he had a strong commitment to regional Australia.

“While the leadership is a choice for the Liberals, any change would require a new coalition agreement and a new message of support to the Governor-General from me,” Truss told reporters.

One long-time Liberal who quickly voiced his displeasure was former Victorian Premier Jeff Kennett, who tweeted: “Malcolm Turnbull, you self-centred, selfish individual…it has always been about you.”

-with AAP