Prime Minister Malcolm Turnbull has defeated Peter Dutton 48-35 in a leadership ballot in the Liberal party room.

The Home Affairs Minister has now resigned from the cabinet, leaving Mr Turnbull to consider a ministerial reshuffle.

The prime minister declared the leadership vacant after entering the party room with his deputy Julie Bishop shortly after 9am on Tuesday morning.

Party whip Nola Marino said Mr Turnbull won 48 votes to Mr Dutton’s 35.

“He thanked his colleagues for their support,” Ms Marino told reporters in Canberra.

Julie Bishop retained the deputy leadership after running unopposed.

Mr Turnbull called the spill after a week of leadership speculation sparked by Liberals angry with his National Energy Guarantee.

The prime minister caved in to their demands to remove the emissions reduction target from the legislation, but it still wasn’t enough.

After Mr Turnbull called the spill, Mr Dutton put his hand up to challenge.

Dutton resigns from frontbench after loss

Mr Dutton resigned from the government frontbench after the failed leadership challenge on Tuesday morning.

Mr Dutton’s camp believed it could get to the 43 votes needed to oust Mr Turnbull, but the prime minister’s backers insisted he still had majority partyroom support.

Fellow MPs from Mr Dutton’s home state of Queensland are understood to have been encouraged to turn on Mr Turnbull.

Small Business Minister Craig Laundy warned a leadership change would go down like a lead balloon.

“If we are fighting amongst ourselves, guess what, when the voters go to the election, they’ll mark us down as they should,” Mr Laundy said.

Shorten hits out at Turnbull

Malcolm Turnbull is pretending to run the country when his backbenchers have the same amount of power he does, Bill Shorten says.

The Labor leader told his caucus the prime minister was in trouble in his own party.

“This morning the other fella looked into the abyss and the abyss looked straight back at him,” Mr Shorten told his MPs on Tuesday.

“I don’t know how he can pretend he’s running the country when every backbencher has as much power as he does.”

What’s next for Malcolm Turnbull?

* Malcolm Turnbull must reshuffle his ministry, with a number of frontbenchers expected to go to the backbench.

* The prime minister must rebuild bridges with the 35 Liberal MPs who voted against him.

* With the corporate tax cuts laws likely to fail in the Senate and the National Energy Guarantee shelved, Turnbull needs a fresh economic agenda.

* Peter Dutton’s forces could consolidate and have another crack, as has occurred in past leadership spills.

* Parliament wraps up for the week on Thursday and does not return until September 10.

* The federal election is due by May 2019, but Turnbull may be tempted to call it within weeks in a bid to sharply focus the minds of Liberal MPs, unify the party and ensure no further bloodletting.

* The PM heads to South-East Asia next week for trade and security talks.

* Labor has led 38 Newspolls in a row, but Turnbull has maintained a strong lead as preferred prime minister.