Senior NSW Liberals have conceded the Berejiklian government is "getting it wrong" on key issues and is facing the likelihood of being unable to retain its majority at next year's election.
As MPs were coming to terms with the spectacular loss of one of the Liberal Party's safest seats in the Wagga Wagga byelection, senior party figures warned that the Coalition was in "certain danger".
"We lost Orange when we didn't expect it, we lost Wagga when we didn't expect it and now we only have six seats before we are in minority. I think it is almost a certainty," one senior minister said.
"This train wreck in Wagga will no doubt panic MPs, and I would expect some will start to jump ship as they face the possibility of being in opposition."
Independent candidate Joe McGirr, a doctor and academic, was on track for a historic win in Wagga Wagga as swings above 30 per cent hammered the Liberals in booths across the electorate.
Dr McGirr was still marginally ahead of the Liberal candidate Julia Ham on first preference votes, with more than 85 per cent of the vote counted on Sunday afternoon.
A final result is not expected for several days but the Liberals cannot win and Dr McGirr remained "quietly optimistic" he would hold off Labor and take the seat.
"[People] are already excited by the change that has happened," Dr McGirr said.
"This is now a marginal seat.”
One senior Liberal said the loss would send shockwaves through the government and force a complete rethink of its strategy in key marginal seats.
"We will need to have a look at the issues we are campaigning on and accept that perhaps we are getting it wrong," the source said.
There was still widespread anger about council amalgamations and the government's recently announced marine parks policy could also be problematic for the government, the source said.
The Shooters, Fishers and Farmers are gearing up to target the government's vulnerable seats over its plan to extend recreational fishing bans in zones from Newcastle to Wollongong.
But the source said that the byelection loss would ensure there was "no complacency" heading into March and should force MPs "to actually get out there and start working".
Several MPs also said the Premier had made the wrong call by insisting that the Liberals contest the seat, rather than the National Party.
"They should've given it to the Nats to run," one backbencher said, adding "hindsight is a wonderful thing."
"The lesson out of this is, come March, it’s a seat-by-seat proposition. Every member has to look after their own seat."
Another Liberal MP said the disastrous result meant the party now needed to bow out of the Wagga Wagga race in March.
Ms Berejiklian publicly claimed "full responsibility" for the result on Sunday morning, saying voters' mistrust of politicians at both levels of government was the deciding factor in her party's thumping defeat.
"The people of Wagga sent me and my government a very strong message [on Saturday] ... and I accept that message," Ms Berejiklian said.
But internally her office was apportioning blame to the federal government, sources said.
"Her team is communicating to us this is the feds, don’t be alarmed," an MP said. "I don’t buy it. A 30 per cent swing is far too great for it to be just that."
According to one senior Liberal, internal party polling showed the seat was still comfortably winnable until the federal government's implosion.
But it is understood that polling was conducted before Dr McGirr, who contested the seat in 2011 and secured 30 per cent of the vote, had announced he was running.
"The federal Liberal Party self-immolated. [Malcolm Turnbull] was not only toppled but completely dismembered, and publicly," the source said.
"Gladys Berejiklian should send a thank-you note to Tony Abbott for this bloodbath."
The government was forced to call a byelection in the seat, held by the Liberals for more than 60 years, after long-serving MP Daryl Maguire admitted at a corruption inquiry in July that he tried to earn payments by setting property developers up with investors.
Alexandra Smith is the State Political Editor and a former Education Editor at the Sydney Morning Herald
Lisa Visentin is state political reporter. She has previously covered urban affairs, and worked in federal parliament.