Cabinet ministers say Prime Minister Tony Abbott is being urged to dump Joe Hockey as Treasurer if the Canning byelection goes badly for the Liberal Party.
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And an early federal election, to be held in March 2016, is also being considered at the highest levels of the Abbott government.
Fairfax Media has been told by two cabinet ministers that talks over axing Mr Hockey have been held, with a move to sacrifice the Treasurer designed to shore up Mr Abbott's own leadership and quell a potential backlash after the September 19 poll.
Social Services Minister Scott Morrison, who is widely considered to be one of the government's star performers, would likely be elevated to the Treasury post and Mr Hockey would be offered another portfolio.
The Liberal Party holds the seat of Canning with a margin of 11.8 per cent, but recent polling in the seat shows it is now on a knife edge, with swings to Labor of as much as 10 per cent forecast.
One cabinet minister familiar with the talks said a swing against the Coalition of more than six per cent - which would still see the Liberal Party's candidate Andrew Hastie win the seat - would be bad news for the prime minister and more than 10 per cent would be "dire".
"They are considering dumping Hockey post-Canning and believe that will get them to Christmas," the minister said, with any move dependent on the result.
A second cabinet minister said Mr Abbott was under "enormous pressure" and it was possible Mr Hockey would be "thrown to the wolves" to protect the prime minister's leadership.
The move on Mr Hockey would be designed to reset the Abbott government's economic messaging, direction and strategy, shore up the prime minister's hold on the leadership just seven months after an extraordinary spill motion and see the government through until Christmas.
Under the plan, parliament would then not return in February and instead a double dissolution election would be held in March.
A third cabinet minister approached by Fairfax Media about the prospect of Mr Hockey being dumped and a March poll being called said they "wouldn't write that off as a theory".
That minister said a swing of less than six per cent against the Abbott government in Canning would be a good result.
And a fourth minister said "if Canning goes badly, he [Mr Abbott] will have to do something dramatic, quickly" but played down the likelihood of Mr Hockey being dumped for Mr Morrison.
That minister said a March poll was "absolutely on the cards" and that Mr Abbott was expected to reshuffle his front bench by the end of the year.
A decision to dump Mr Hockey would be politically risky as, despite having endured a difficult 15 months since handing down his first budget, the Treasurer has a loyal band of supporters in the party room.
It would be welcomed, however, by some in Coalition ranks who in part blame the Treasurer for the government's current woes, including the fact that it has trailed in the polls since the May 2014 budget.
The leaking of confidential talks about the future of Mr Hockey and a possible early election could also stay the Prime Minister's hand and ensure the Treasurer remains.
Last week, Mr Hockey was again criticised by colleagues for being distracted from his day job after signing up to co-chair a parliamentary friendship group for an Australian Republic and for a speech that again flagged personal income tax which was short on detail.
The Abbott government has been hit by a rolling series of crises and missteps including most recently the resignation of former Speaker Bronwyn Bishop and questions over the future of trade union Royal Commissioner Dyson Heydon.
A spokesman for Mr Abbott said he had full confidence in his Treasurer and "the Prime Minister is on the record as saying he expects the Government to run a full term".
