Jodi McKay says she will not quit as NSW Labor leader despite the front bench resignation of potential leadership challenger Chris Minns over a "dirt file".
Mr Minns quit as Labor's transport spokesman on Wednesday after declaring his position on the front bench "untenable" due to a purported "dirt file" circulated by the office of deputy leader Yasmin Catley.
However Mr Minns said he had no immediate plans for a leadership tilt.
The Kogarah MP left the front bench a day after shadow treasurer Walt Secord resigned on Tuesday, saying he could no longer serve under Ms McKay.
That may open the flood gates for other Labor MPs to follow suit but Ms McKay insists she has the support of the caucus - despite a disappointing result in last weekend's Upper Hunter by-election - and is not budging.
She said Labor's declining first-preference vote in Upper Hunter - from 29 per cent in 2019 to 21 per cent last weekend - was matched by a fall in the victorious National Party's vote from 34 to 31 per cent.
Ms McKay also insisted neither she nor Ms Catley knew anything about the "dirt file" dossier, and the staffer who distributed the file has been removed.
"It was a by-election we were never going to win, a seat we haven't held in 90 years - there were rumblings from a quarter that has always had rumblings, that wasn't successful twice before," Ms McKay told 2GB radio.
Ms McKay will now be obliged to reshuffle her front bench, likely this week.
Mr Minns told reporters on Wednesday he had no immediate plans for a tilt at the top job but "needed to speak to his colleagues".
"The Labor party over the last two years has been too negative," Mr Minns said.
"There's a real space for NSW Labor and social democratic parties around the world to come up with answers to the problems facing working families.
"We need to be more optimistic and more positive about politics and the way we approach politics and what we say."
The dossier circulated about Mr Minns prompted Mr Secord to be the first to quit the front bench, arguing Mr Minns would be a better leader for the opposition.
Mr Secord said it was well known he had disagreed with Ms McKay on "policy, parliamentary and strategic decisions and directions" over the past two years.
Yet the path to leadership for Mr Minns could be difficult unless Ms McKay was persuaded to vacate her role.
Since 2013, Labor party rules require 60 per cent of the caucus to vote to unseat a leader, as well as a vote by party members.
Some 31 Labor MPs would therefore be required to vote to remove Ms McKay.
Ms McKay beat out Mr Minns for the Labor leadership after the party's 2019 election defeat, with 29 caucus votes to Mr Minns' 21.
The opposition leader also noted the coalition government had enjoyed the advantage of incumbency during the COVID-19 pandemic.
"If someone has support greater than mine, if someone believes they have the support of the party to do this, I'll always put the party first," Ms McKay said.
"With great respect to Chris, he doesn't have that.
"I acknowledge I'm not popular like Gladys Berejiklian but I can look myself in the mirror every day and tell myself I've never turned a blind eye to corruption."
Ms Berejiklian declined to rub salt into Labor's wounds, saying on Wednesday: "The public just want their elected officials to do their jobs and focus on what's important to them ... when you don't, people notice."