The Liberals are licking their wounds and are trying to figure out what went wrong after unexpectedly losing the Aston federal by-election, despite rising living costs.

The loss of the east Melbourne seat following the retirement of ex-Morrison government minister Alan Tudge was the first time an incumbent federal government has won a by-election against an opposition party since 1920.

Liberal Leader Peter Dutton and senior Coalition figures maintain his leadership is safe, despite the historic loss.

But all admit there is work to be done.

“Now, the question is how we rebuild from here,” Mr Dutton said on Sunday.

Liberal insiders are examining why their messaging about the rising cost of living under Labor failed to cut through to voters in the mortgage-belt seat dominated by families.

Some have blamed a “dirty” and personal campaign run by Labor against Mr Dutton, while others have pointed to voter anger at having to go to the polls for the third time in 10 months, given the by-election was triggered by Mr Tudge’s departure.

Others argue the government is still in a honeymoon period, and that Australians want Labor to succeed, and point to local infighting in the party’s Victorian branch.

Senior Victorian Liberal Jane Hume said despite having a good candidate in former councillor and barrister Roshena Campbell, the party wasn’t able to overcome numerous factors in play in Aston where its margin was wiped out.

“You will never put it down to one thing, otherwise, we would have fixed it,” Senator Hume said.

“There was a confluence of events and timing. Even with a great candidate, we couldn’t overcome that confluence.”

Former unionist and breast cancer survivor Mary Doyle won the seat with a 6.5 per cent swing after cutting down Mr Tudge’s double-digit margin at the federal election to 2.8 per cent.

Mr Dutton noted inner Melbourne seats had always been hard for the Liberals to win, with the Coalition failing to win a majority of seats in the city over the past decade.

Mr Dutton rejected suggestions a lack of policies played a role, saying it had only been 10 months since the federal election loss.

“We are not rushing out with policies at the 10-month mark that people will have no recollections by the three-year mark,” he said.

“We haven’t yet made a decision about what our policies will be at the next election … but they will be about trying to reduce, not increase, prices.”

-AAP