Overcoming a serious mechanical failure and a collision with local wildlife, he tallied an unassailable points haul in the Production World Rally Championship (PWRC) and was crowned the provisional winner, with two rounds to go.
World Rally Radio announced an ecstatic Paddon and co-driver John Kennard leapt on top of their Subaru WRX STI, waving a New Zealand flag once they completed the 26th and final stage.
Paddon was sixth overall - his best World Rally Championship (WRC) finish - and ahead of seven-time WRC champion Sebastien Loeb and 1min 32sec in front of closest PWRC driver Poland's Michal Kosciuszko.
Paddon described his 2011 season - where he became the first PWRC driver to win four consecutive rounds - as "absolutely perfect".
"This weekend has been tough. It's been less than easy," he added, before reflecting on how far he has come and how far he wants to go, to World Rally Radio.
"A few months ago we had no money and no campaign, but thanks to the people back home in New Zealand we've come here and won the title. It's awesome and we'll try as hard as we can to come back next year in something bigger and better."
Rally New Zealand general manager Nick Carter said it was a momentous achievement for the country and Paddon's team.
"From our perspective, we are absolutely thrilled for him and the New Zealand World Rally Team. It puts New Zealand on the map, even more, to produce great world rally drivers like him. It is an amazing step forward for his career."
Although the Kiwi driver finished the Coffs Habour-based event's second day just like he ended the first - in the lead - Saturday morning started with a near-catastrophic power failure on stage 11.
The hose connecting the turbo and the intercooler split, stripping Paddon's Subaru of vital boost. Despite his and Kennard's desperate roadside repairs, they were unable to fix the fault and were two minutes late starting stage 12.
Haemorrhaging time over the next three stages until he could return to service, Paddon lost the lead by 49.6sec to Kosciuszko and also incurred a 20sec penalty for starting stage 12 late.
Repairs at service allowed Paddon, who was more than 1min 20sec in front after day one, to pick up pace during the afternoon, storming back ahead of Kosciuszko by the completion of Saturday's final stage.
However, it was not all plain sailing, as accidentally running over a wallaby on stage 16 gave Paddon front-end damage to the car and an overheating engine.
Despite the setbacks, he started day three's final six stages leading Kosciuszko by 2.9sec after his New Zealand team fully repaired the Subaru overnight.
Paddon is looking further ahead than the final two PWRC rounds to next year, where he will need to find a budget of about $NZ1 million.
"We are working hard on 2012, where I'd ideally like to step up to Super 2000, which is an option more comparable to a WRC car."
