The NSW government's hold on Gladys Berejiklian's former seat of Willoughby remains in doubt as preference counting narrows the gap between its candidate Tim James and independent Larissa Penn.
Speaking at the Liberal headquarters on election night, Mr James told supporters he was "very confident" his party had retained the seat on Sydney's north shore, following Saturday's by-election.
"I am so humbled and so grateful to the people for putting their faith and trust in me as their next member," he said.
But ABC chief election analyst Antony Green said the race wasn't over.
"Who would have thought that of the four by-elections, Willoughby would turn out to have the closest result?" he said.
"The race is much tighter than we thought on Saturday night."
The count as it stands indicates a less than four-point difference between Mr James (51.9 per cent) and Ms Penn (48.1 per cent).
There has been a more than 19 per cent swing away from the government, and it is the first time in more than 30 years the Liberal first preference vote has fallen below 50 per cent.
Green said all on-the-day votes and pre-poll votes had been counted.
"The Electoral Commission is recounting the vote for preference... we may not know the results until postal counts are done," he said.
Counting of postal votes, which made up about half of all votes cast in the by-election, will begin on Saturday.
Green said the unprecedented number of postal votes cast due to the COVID-19 pandemic made it difficult to predict how the count would unfold.
"Tim James is just ahead at this stage. Basically, the result has to be reversed on the postals for Larissa Penn to get ahead and I'm just not sure that will happen," he said.
"You would expect on postal votes that an established party candidate is going to do slightly better."
NSW Treasurer Matt Kean told Nine Radio this morning he was confident postal votes would favour the Liberal Party.
"Let's not forget the last time [a new Liberal candidate in] Willoughby went to an election, which was when Gladys ran in 2003, she only won it by 144 votes," he said.
"So, Tim's got a landslide ahead of him compared to what Gladys had back in 2003.
"I'm confident we'll get over the line. But we're not going to count our chickens just yet."
The seat was previously held by the former premier, Ms Berejiklian, who resigned in October pending an investigation by the Independent Commission Against Corruption.
It has traditionally been regarded as a Liberal stronghold, having been held by the government since 1981 and for all but two Labor terms since 1927.
Former state Liberal Party minister, Michael Yabsley said Willoughby was an example of the "spectacular resurgence on the part of independents".
"You can say there's an element there responding to tough times as a result of the pandemic," Mr Yabsley said.
"There is another line that voters are saying 'a pox on both your houses' to the major parties, and we're also seeing independents now being incredibly well-resourced which is something that typically hasn't happened in the past."
Ms Yabsley, the ex-federal treasurer of the Liberal Party, said Labor may be ruing a missed opportunity to run in Willoughby and pass preferences to Ms Penn.
"I think all sitting members in Liberal party seats will be looking at their situation with some trepidation, and frankly they'd be foolish not to," he said.
Ms Penn secured just 9.9 per cent of the primary vote when she contested the seat in the 2019 state election.
Green also said the result would have implications federally.
"A little-known independent with not much money has run the Liberal party a tight race in a safe seat, and there are higher profile [independent] candidates running at the federal election in Liberal seats," he said.
Willoughby was one of four by-elections held on Saturday.
Labor is set to win the seat of Bega off the government and retain Strathfield, while the Nationals will hold Monaro.
