Independent candidate Dr Kerryn Phelps as claimed victory in Malcolm Turnbull's old seat of Wentworth.
But even if Liberal candidate Dave Sharma was to manage a spectacular last-minute turnaround with the help of postal votes and some corrected preference allocations through the checking process, this is still a catastrophically bad outcome for Scott Morrison and the Coalition.
Dr Phelps now has 51.1 per cent of the vote in two-party terms, with the deadline for postal votes coming on November 2.
It was held by a 17.7 percent margin under former prime minister Malcolm Turnbull, who quit parliament after he was ousted as leader in an August party coup, forcing the by-election.
Rather than use his authority as Prime Minister to argue on broad themes, Mr Morrison engaged in cheap retail politics, especially with his opportunistic thought-bubble promise to Jewish voters in the electorate to consider moving the Australian embassy in Israel to Jerusalem.
If Dr Phelps is confirmed the victor, there will be a crossbench of six members in the House of Representatives with Labor holding 69 seats and the coalition one short of a majority with 75.
Mr Morrison admitted Liberals were angry and had expressed their frustration at the ballot box.
Katter reiterated his support for the government on Saturday night with a long wish-list, including action on drought, regional development and Indigenous health.
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Phelps gave tacit backing to a signal from Scott Morrison last week that resettlement in New Zealand was an option if the parliament passed legislation preventing asylum seekers from ever settling in Australia.
With parliament sitting this week Centre Alliance crossbencher Rebekha Sharkie said she and independent Cathy McGowan would seek a meeting with Morrison on Monday to discuss issues - including the instability in the Nationals.
"What we have done is tapped into a sentiment in the Australian people, to talk about the issues that are important to them, not the issues about survival for a particular political party", Phelps told supporters during her victory speech.
"The Liberal Party has paid a big price tonight for the events of several months ago", he told the party faithful.
"I think people actually wanted a hung parliament, they actually wanted an independent on the cross bench so that decisions could be made with a more collaborative approach then just a rubber stamp for whatever. the Liberal Party wanted to do", Phelps told Studio 10.
In fact, they were created to demonstrate that the Morrison government is unequivocally committed to every US-led war and military provocation, including its backing for Israel's persecution of the Palestinians and its moves towards a regime-change against Iran.
Fellow independent Andrew Wilkie said he would not guarantee confidence or supply. "We in the Centre Alliance go through all these motions, make notes on the notice paper and the senators keep up with what they are voting on". "I think she'll be very influential".
A spokesman for Mr Morrison declined to comment.
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