Independent Kerryn Phelps extended her lead in the Wentworth by-election following a recount

Simon Thomsen

Independent Dr Kerryn Phelps remains in front of Liberal candidate Dave Sharma and looks likely to win Malcolm Turnbull's former seat of Wentworth after recounts in three key booths today nearly doubled her lead.

ABC election analyst Antony Green said the problem was the preferences being incorrectly transposed on tally sheets.

Earlier on Sunday, it appeared that Sharma was rapidly narrowing the gap on his rival in his bid to retain Wentworth for the Liberals and government, with the gap narrowly to less than 900 as nearly three quarters of more than 5000 postal votes went his favour.

But a recount of allocation of preferences in the Bondi Beach, Bellevue Hill and Vaucluse booths late on Sunday saw Phelps double her lead before the latest count on Sunday evening left her 1,616 votes ahead with the two-party preferred split at
51.1% to 48.9%, given Phelps a swing of around 19%.

Earlier on Sunday, her lead largely vanished today as counting resumed and postal votes heavily favoured Sharma

What at first appeared to be a catastrophic drubbing for Scott Morrison's Coalition government, with the Liberals losing the seat for the first time in its history is now turning into a neck-and-neck battle as the postal votes were counted.

Sharma grabbed the lion's share of 5,463 postal votes counted this morning - 57% of the primary votes to Phelps' 17% - and nearly 65% on a two-party preferred basis to slash the independent's lead to just 884 votes.

Phelps had 36,951 following the post count, with Sharma on 36,067 votes on a two-party basis.

With Saturday's votes all counted from 43 booths in Wentworth, the turnout for the by-election was 73.91%.

The margin between the rivals is now just 1.2%, at Phelps 50.61%, Sharma 49.39%, putting Malcolm Turnbull's successor within striking distance of retaining the seat for the Liberals and maintaining the government's one-seat majority in the lower house.

A further 1,266 postal votes have been received, but not yet processed.

Based on the current trend, Phelps would still win the seat by just over 500 votes if no more postal votes are returned -
- the AEC will wait another fortnight, 10 business days, for any additional ballots to arrive. The normal rate of return is around 70% and nearly 13,000 postal ballots were issued.

If the extra votes did arrive and the current preference trend continued, the Liberals could regain the seat at the last minute, despite suffering a swing of more than 17%.

While recount would automatically be held if less than 100 votes separates the two candidates, the Liberals could call for a recount provided they're willing to bear the cost.

Prime Minister Scott Morrison, who acknowledged voters were angry at Malcolm Turnbull's ousting as PM and were punishing the government as a result, said: "We will simply wait for that normal democratic, robust and credible process to follow it's course".

He had already called Phelps to congratulate her, although the Sharma has not conceded the seat.

ABC election analyst Antony Green was surprised by the dramatic narrowing of the margin, but still expects the independent to win.

"What looked home and hosed last night is actually much narrower and I would still say Kerryn Phelps is ahead and still favoured," he told the ABC.

On Sunday evening, Green said it now looks increasingly likely that Phelps will will the seat, even if any outstanding postal votes continue to favour Sharma.

But the closeness of the vote, and the likelihood that the gap may again shrink may mean it will take until later in the week before the winner of the ballot is known.