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Matthew Guy to resign as Liberal leader after second Victorian election defeat

Opposition Leader Matthew Guy has announced he will resign as leader of the Victorian Liberals after a second bruising election defeat.

Labor has won a third consecutive term and is on track to retain a comfortable majority in the lower house.

Mr Guy released a statement saying once the results of the election were firmed up, a new Liberal leader would be chosen.

"As soon as it is clearer which Liberal Party candidates will form the next parliamentary party room, I will call them together to elect their new leadership team," he said.

"I will not be a candidate for the position of leader."

Mr Guy said the Coalition had achieved a "respectable" statewide swing of between 3 and 4 per cent, which was "most profound" in Melbourne's north and west.

"This represents a huge future electoral opportunity for the Liberal Party," he said.

As Labor's victory became clear on Saturday evening, Mr Guy phoned Premier Daniel Andrews to concede. In his concession speech, he described the disappointment of the night but said he was "immensely proud" of his party's gains within the overall loss.

Senior figures urged the party to rebuild and undergo "soul searching" in the wake of the loss.

Former premier Jeff Kennett backed Mr Guy's decision to stand down after leading the party to two election losses.

"I thank him for what he's done but I think that is the right decision and that will give the party, once the seats are decided, the time to sit down and decide who might be their new leadership team," he said.

Liberal leadership race opens

As the vote-counting continues, senior Liberals are still facing a tight race to retain their seats.

John Pesutto — who lost his seat of Hawthorn at the 2018 election — initially looked to have failed in his bid for re-election against teal independent Melissa Lowe, but overnight he took the lead.

The ABC now projects Mr Pesutto will win the seat.

If he is successful, he is tipped to be a contender to lead the party for the next term.

Richard Riordan, Brad Battin and Ryan Smith are also believed to be considering a run, while Matthew Bach has been touted despite being in the upper house.

Mr Battin, who won the seat of Berwick for the Liberals, told ABC Radio Melbourne his leadership ambitions were "not a hidden secret".

"I've put my hand up in the past for a reason," he said. 

"However, right at the moment I'm not making that call — I still have to sit down with my wife."

Mr Battin said any candidate to lead the party into the next election had to be "someone who internally can build, commit and stay on track to where we want to go in four years' time".

"We have to have a plan — it's going to be a journey, it's not going to be an easy one," he said.

"We have to make sure we stay united."

Redbrige pollster and former Liberal strategist Tony Barry said it would be a "total act of madness" for the party to elect Mr Battin, "which is why I can't rule it out".

He said it was a "great pity" Louise Staley had lost her seat of Ripon, as she would have been a possible contender.

Nationals discuss Coalition partnership

While the Liberals are picking up the pieces, their junior Coalition partner the Nationals have celebrated victory in regional Victoria.

Danny O'Brien, re-elected for the Nationals in the seat of Gippsland South, told ABC Radio Melbourne breaking his party apart from the Coalition had to be "on the table".

"We need to think about what the best is, not just for us, but for the Liberal Party," he said.

A divorce within the Coalition would not be without precedent. The Nationals split from the Liberals in the wake of the 1999 election, before re-forming their alliance in 2008.

But Nationals Leader Peter Walsh would not be drawn on the Coalition's future, saying Mr O'Brien was "totally out of his remit" as it was a discussion which should be had in the party room.

"When we had that discussion in the party room a number of years ago, there was overwhelming support for staying in the Coalition," he said.

He said he did not believe a split would be on the agenda "but it will be talked about".

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