The speculation came as the former NSW Opposition leader Peter Debnam confirmed yesterday he would not be standing at the next state election, surrendering the safe seat of Vaucluse after a 17-year parliamentary career. A spokeswoman for Mr Turnbull said she and Mr Turnbull had discussed the possibility. ''We're not making a comment about that today,'' she said.

One senior Liberal source said they had tried to convince Mr Turnbull to run for NSW premier long before he entered federal politics. ''I tried to talk him into it seven years ago,'' the senior figure said. ''He could have been premier for seven years by now.''

Mr Turnbull's silence yesterday was not necessarily an indication that he would move to state politics, the source said. ''I don't think Malcolm knows what he wants to do,'' he said.

Liberal sources yesterday scoffed at the suggestion. ''It's ridiculous,'' one said. ''It sounds like the hard right [faction] trying to undermine [the NSW Opposition Leader Barry] O'Farrell.''

''It's a specious rumour,'' another said.

The speculation follows deep-seated concerns in parts of the Liberal Party about Mr O'Farrell's electoral prospects since he continues to find it difficult to gain traction in opinion polls. Even though polling consistently shows the Opposition will win the state election next year, with the Labor Party's primary vote holding about 30 per cent, Mr O'Farrell regularly trails the premier of the day when voters are asked who would make the better premier.

''He's waiting for the Government to lose,'' one senior MP said yesterday. ''He's got to get his agenda out there if he wants to have a chance. There is every chance that [the Premier, Kristina] Keneally will be able to claw back some of that primary vote. The next election is likely to be a lot closer than [O'Farrell] thinks.''