The independent state MP for Port Macquarie, Rob Oakeshott, said yesterday he had been informally approached by the Liberal Party to be its candidate.

Mr Oakeshott said he had yet to decide whether to stand but could do so as an independent or a Liberal. The latter would infuriate the National Party, to which he belonged until 2001.

Mr Vaile, the former Nationals leader, prefers as his replacement in the seat of Lyne the former mayor of Port Macquarie Rob Drew.

Leslie Williams, who stood against Mr Oakeshott at the last state election, is also a possibility.

The NSW Nationals leader, Andrew Stoner, is considering a move to the federal arena but his enthusiasm was waning yesterday and he will decide by the end of the week.

He warned that any move by the Liberals to woo Mr Oakeshott would be "inflammatory".

Labor is unlikely to stand a candidate if Mr Oakeshott runs as an independent; the Liberal Party is waiting to see what both Mr Oakeshott and the Nationals do.

The retirement of Mr Vaile allows both conservative parties to contest.

But a senior Nationals source said his party would be not be happy if the Liberals stood because demographic changes favoured the Liberal Party winning and, with the Nationals trying to rebuild and with a merger in Queensland delicately balanced, this would not be good for Coalition relations.

"They will want to make a pretty careful decision about that because it could be counterproductive," he warned.

Mr Vaile's departure has also focused attention on Peter Costello's future.

Sources close to the former treasurer said he had been approached by more than half the Coalition frontbench over the past six months, asking him to stay in politics and take over the leadership.

People are split, however, over whether he should declare his intentions now or wait, and whether he would immediately be given the leadership.

"He tells a lot of people privately that he's going but doesn't want to say that publicly," one frontbencher said yesterday. "It's not particularly edifying."

Another said Mr Costello should not be prevailed upon to make up his mind now but be allowed to wait until early next year. By then the party would know whether it was going to persist with Brendan Nelson.

"If Peter wants to come back, then, depending on the time, he would overwhelmingly get party-room endorsement for the leadership," a former minister said.