Australia will field its seventh-least experienced XV at Forsyth Barr Stadium as coach Eddie Jones continues his regenerative path on the road to the Rugby World Cup next month.
Jones has turned to 24-year-old halfback McDermott to lead Australia against the All Blacks on Saturday and he will become the 86th Wallabies skipper.
"Tate's got all the attributes to be a great captain of his country," Jones said.
"We're definitely remodelling the team. We need to change the team from where we've been and part of it is definitely the leadership aspect."
McDermott was buried by Scott Barrett after a lineout near the goal-line in the third minute of Australia's 38-7 loss at the MCG, allowing Shannon Frizell to score, but Jones backed him to bounce back in Dunedin.
"He's a tough little bugger," Jones said.
McDermott is the fourth different captain in Jones' four Tests on his return as Wallabies coach, inheriting the role from prop Allan Alaalatoa who suffered a ruptured Achilles last weekend.
Longtime skipper Michael Hooper remains sidelined with a calf issue, while another of Australia's regular leaders, James Slipper, will start on the bench.
Jones said he would re-assess the captaincy in coming weeks ahead of the Rugby World Cup in France starting next month.
Receiving the armband completes a remarkable turnaround for McDermott, who was overlooked by Jones in a 33-man training squad back in April.
"I've learned a lot in the last two years and I've learned a lot in the last month," McDermott said.
"Just how quickly we can solve problems is probably the biggest one.
"I've got a lot of people around me to help me support and play my best footy."
Saturday's Test looms as a mighty challenge for an inexperienced side.
Jones has named an unchanged backline but overall, the starting XV has just 277 caps - the seventh-lowest total in the professional era.
Pone Fa'amausili will earn a first Test start, named at tighthead prop in place of Alalaatoa with Taniela Tupou also unavailable through injury.
Richie Arnold comes into the starting team at lock alongside Nick Frost with Will Skelton dropping to the bench while Fraser McReight is introduced as openside flanker and Tom Hooper shifts to the blindside.
Jones is sticking by 22-year-old Carter Gordon at five eighth after his shaky night with the boot in his starting debut last weekend and the coach hit back at critics.
"I don't think I got (selection) wrong, mate. In fact, I'm going to get it right," Jones snapped.
"If you know anything about rugby you know that 10s need time in the seat."
The Wallabies haven't won against the All Blacks in New Zealand for 22 years (28 Tests).
However, they may be heartened by Ian Foster's decision to field a weakened XV, with just three starters from last week.
Samipeni Finau, Shaun Stevenson and Dallas McLeod will win their first All Blacks caps as Foster uses the occasion to test his selection thoughts ahead of France,
McDermott was two years old when the Wallabies last defeated the All Blacks across the ditch, a 23-15 win that also came in the South Island university city, at the now-demolished Carisbrook.
Wallabies: Angus Bell, David Porecki, Pone Fa'amausili, Nick Frost, Richie Arnold, Tom Hooper, Fraser McReight, Rob Valetini, Tate McDermott (c), Carter Gordon, Marika Koroibete, Samu Kerevi, Jordan Petaia, Mark Nawaqanitawase, Andrew Kellaway. Res: Jordan Uelese, James Slipper, Zane Nonggorr, Will Skelton, Rob Leota, Nic White, Quade Cooper, Izaia Perese.
All Blacks: Tamaiti Williams, Samisoni Taukei'aho, Nepo Laulala, Brodie Retallick, Sam Whitelock, Samipeni Finau, Sam Cane (c), Ardie Savea, Finlay Christie, Damian McKenzie, Leicester Fainga'anuku, Anton Lienert-Brown, Braydon Ennor, Shaun Stevenson, Will Jordan. Res: Dane Coles, Ofa Tu'ungafasi, Fletcher Newell, Tupou Vaa'i, Luke Jacobson, Aaron Smith, Richie Mo'unga, Dallas McLeod.
