The Morrison government has lost its majority and suffered the biggest swing against an elected government in by-election history, with independent candidate Kerryn Phelps pulling off an historic victory in Malcolm Turnbull’s former safe seat of Wentworth.

The voters of the affluent Liberal seat inflicted an unprecedented swing of more than 20 per cent swing against Liberal candidate and former diplomat Dave Sharma.

Australia now faces a hung Parliament, with the Coalition government reduced to 75 seats in the House of Representatives, and the prospect of an early election should the government fail to get the required support from the crossbench.

The high-stakes contest was declared over remarkably soon after polls closed on Saturday, with ABC election analyst Antony Green calling the election in Dr Phelps’ favour just after 7pm – about an hour after polls closed.

The scale of the loss is being seen as the result of an inevitably angry protest vote against the knifing of former prime minister Malcolm Turnbull, who had held the seat since 2004.

The final count on Saturday night had Mr Sharma sitting on 39.9 per cent of the primary vote, Dr Phelps at 33 per cent, Labor’s Tim Murray at 10.8 per cent and the Greens at 8.7 per cent.

The ABC projected a two-party preferred win to Dr Phelps of 56 per cent to 44 per cent for Mr Sharma, after the counting of preferences that flowed heavily to Dr Phelps.

Dr Phelps, who runs a medical practice in Double Bay, is the former head of the Australian Medical Association – the first woman and LGBT person to serve in the role. She danced and celebrated with jubilant, purple-clad supporters gathered at the North Bondi Surf Living Saving Club on Saturday evening.

Dr Phelps’ socially progressive platform appealed to Wentworth voters. Photo: AAP

Describing the campaign as a “David and Goliath struggle”, the independent praised her supporters for helping to run a successful grassroots campaign without the major party resources enjoyed by her opponent.

“Just a few short weeks ago I was told this was an impossible task and if we actually managed to win the seat of Wentworth, that it would be a miracle. It was said if we won the seat of Wentworth, it would make history, and, my friends, we have made history today,” Dr Phelps said.

Dr Phelps has described herself as “socially progressive and economically sensible”, and ran on a platform that opposed discrimination against LGBT people, and called for an immediate end to offshore detention of asylum seekers and action on climate change.

The win should “signal a return of decency, integrity and humanity to the Australian government. And let’s hope for a bit of common-sense on climate action,” she said.

Prime Minister Scott Morrison turned up at about 8.30pm to buoy the crowd of disappointed Liberal Party faithful at Mr Sharma’s election night party.

“What has happened here in Wentworth is not unexpected. Liberals are angry and they’ve expressed that – none in this room, though, I note,” Mr Morrison said.

The Prime Minister used the speech to rally the crowd ahead of his ultimate test, the upcoming federal election.

“I don’t come to you tonight with a vanquished spirit. I come with the indomitable spirit of Liberals all around the country,” he said.

“We will not allow this country to fall into the hands of a Bill Shorten-led Labor Party.”

Mr Sharma (right) and federal Treasurer Josh Frydenberg on the hustings in Wentworth. Photo: AAP

Mr Sharma admitted that the campaign had been “a little bruising”, but hinted that his career in politics may not be over.

Some have speculated that Mr Sharma will try his luck in the seat a second time in the upcoming general election.

Labor deputy leader Tanya Plibersek said the size of the swing was “historic”.

“This shows the values of Scott Morrison are not the values of Wentworth,” she said.

She said Labor, whose candidate Tim Murray was sitting on 11.3 per cent of the primary vote, had “realistic expectations” about his chances in the blue-ribbon Liberal seat.

Ms Plibersek also fuelled speculation that the Labor Party could move a motion of no confidence against the government on the floor of Parliament which, with sufficient crossbench support, could trigger an early election.

Mr Morrison will have to seek the support of Dr Phelps or another crossbench member in order to be assured of confidence.

Dr Phelps earlier described talk of her toppling the Morrison government as “pathetic scaremongering”.

Liberal MP Trent Zimmerman told the ABC on Saturday night that the government already had guarantees of confidence and supply from crossbench members, but described the by-election as a “wake-up call”.

“Obviously Wentworth is a unique electorate in many ways but I think you would find the broader concern about what happened two months ago with Malcolm’s leadership is widely shared across the electorate,” he said.

“It is a wake-up call to us that firstly Australians expect, when they elect a prime minister, that they will decide whether they come or go.

“Secondly, particularly in this case, where there was no real reason that has been articulated effectively as to why some of my parliamentary colleagues decided to vote him out.”

Liberal MP Craig Laundy, who supported Mr Turnbull’s leadership, said he now expected an “internal struggle” in the party about its future direction.

But party members must resist a shift to the right under Mr Morrison, he said.

“I don’t think that has played well in Wentworth,” he told Sky News, adding that issues such as climate change were commonly mentioned by voters at poll booths.

Mr Turnbull’s son Alex tweeted that it was a “great day for Australian democracy”. The entire Liberal Party function room booed him when it was shown on television screens.

https://twitter.com/alexbhturnbull/status/1053561693362503683

-with AAP