The meeting between Joe Hockey and embattled Opposition Leader Malcolm Turnbull has ended.
Mr Hockey went to see Mr Turnbull in his Parliament House office around midday.
He is believed to have told him that he will run for the Opposition leadership tomorrow.
Mr Hockey has been under immense pressure from all sides of the Liberal Party to put himself up as the consensus candidate to stem bleeding over the emissions trading scheme and the leadership.
Mr Turnbull has virtually lost all of his support, but up until now has insisted he will contest the ballot that would follow a "spill" motion.
Mr Hockey would be elected overwhelmingly if Mr Turnbull ran.
Frontbencher Peter Dutton is set to run as Mr Hockey’s deputy.
Frontbencher Tony Abbott, who has said he will challenge Mr Turnbull tomorrow, but would stand aside for Mr Hockey, emerged from the office of Deputy Opposition Leader Julie Bishop, saying his position had not changed.
Ms Bishop then went to Malcolm Turnbull’s office.
Earlier Mr Abbott arrived at Parliament House, telling reporters he was not "over-confident" of his chances in a ballot against Mr Turnbull.
Liberal MPs and senators will meet at 9am tomorrow to consider a leadership spill.
"I’m certainly not over-confident," Mr Abbott said this morning. "I'm still talking patiently and carefully to all of my colleagues."
Mr Abbott said the big issue for him and other Liberal MPs was the impact an emissions trading scheme would have on household.
"No responsible opposition can let a scheme like this get through the Senate without much greater scrutiny," he said.
The Government wants its legislation passed today and has flagged an all-night sitting of the Senate. The Australian Greens are opposed to extended hours and will seek to have the upper house adjourn at 10pm.
Liberal senator Mitch Fifield, who resigned as a shadow parliamentary secretary last week to oppose the scheme, said a consensus is emerging inside the party that Joe Hockey was the best person to lead the opposition.
"Joe has the qualities of leadership that we're looking for," he told ABC Television, adding his colleagues had moved on from Mr Turnbull.
"On Tuesday we will have a new leader of the party."
Other Liberal senators were reluctant to comment on the leadership drama.
"This whole situation ... has arisen as a result of a policy issue, not a leadership issue,'' Senator Eric Abetz said.
He declined to return fire following Mr Turnbull's accusation yesterday that Opposition Senate leader Nick Minchin and his "Minchinites'' were wrecking the party.
''(Malcolm Turnbull) is my elected leader and he deserves my respect in that capacity,'' Senator Abetz said.
But asked how long Mr Turnbull would remain the leader, he replied: "We'll wait and see what happens on that tomorrow".
Senator Abetz was keeping his support for a new leader close to his chest, as was Senator Minchin.
"It's a secret ballot and anything I might have to say about who would be the best leader I'll say in private to my colleagues,'' Senator Abetz said.
Senator Minchin said it was disappointing that Mr Turnbull had rejected the will of the party room.
"That's led us to this sorry impasse.''
Nationals senator John Williams said it was obvious Mr Turnbull had gone down the wrong path with his support of the Government's emissions trading scheme.
He and fellow Nationals said they would look forward to working with Mr Hockey should he take over the top job, describing him as a good bloke.
But there was some praise for Mr Turnbull.
"At least he's had the honour to be consistent pretty well all the way through,'' Family First senator Steve Fielding said.
"What did the Coalition expect when they gave a green light a couple of months ago on negotiating ... ? That was wrong.''
Liberal frontbencher Ian Macfarlane said he would be backing his leader tomorrow.
"I'll be supporting Malcolm Turnbull,'' said Mr Macfarlane, who led negotiations with the Government on the ETS bill.
Kevin Andrews, who made a tilt for the party leadership last week, also hasn't ruled himself out of tomorrow's ballot.
"I will speak ... to some more of my colleagues ... about that,'' he said, adding the party was in need of a new leader.
Former opposition leader John Hewson, who was rolled as party leader in 1994, has described the moves against Mr Turnbull as "gross disloyalty".
He also warned Mr Hockey that he was in danger of terminating his political career early if he chose to contest a leadership ballot.
"It’s a tragedy when you burn off people of the standing of Brendan Nelson and Malcolm Turnbull," he told ABC Television.
Dr Hewson said he was surprised that climate change had caused such disunity in the Liberal Party, given the global community saw it as the issue of the century.
"It’s rather odd in those circumstances to be stepping backwards so far and moving to the right," he said, adding the Liberal Party would become politically irrelevant if did not come out with a substantive response to climate change.
Liberal senator Gary Humphries said Mr Turnbull was the best person to lead the party.
"I’m urging my colleagues to consider whether we have a clear direction on this question of an ETS by retaining Malcolm Turnbull or by switching to some other undetermined position by going for somebody else," he told Capital Radio in Canberra.
Senator Humphries said he respected the views of those who thought man-made global warming was not occurring.
"I don’t agree with it, but I respect it."
Liberal backbencher Dennis Jensen said he regretted voting for Mr Turnbull in last year’s leadership ballot against Brendan Nelson.
"Malcolm does not have my support (this time)," he told reporters, adding he had been warned by colleagues that Mr Turnbull would attack his own party if he did not get his way.
"If he’s not going to get the leadership he will do as much damage on the way out as he can."
Outspoken Liberal MP Wilson Tuckey said Mr Turnbull should resign.
"Above all else, it’s time for a new leader," he said.
with Agencies