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Former ALP boss Warren Mundine will be the Liberal candidate for the seat of Gilmore.Credit:Pat Scala

Five senior Liberal sources confirmed a cross-factional deal for the state executive to sign off on the endorsement on Tuesday,which will be announced by Mr Morrison and Mr Mundine in the electorate on Wednesday morning.

Liberals in Gilmore,on the NSW south coast,had already chosen real estate agent Grant Schultz to contest the marginal seat,replacing the sitting member Ann Sudmalis,who is leaving politics.

But Mr Morrison and key party officials believed Mr Mundine was a better candidate to retain the seat. Polling undertaken by the Liberals last year"came back really good"for Mr Mundine,a senior Liberal said on Tuesday.

"While he's an outsider to the Liberal Party,that’s his strength,"the source said.

Mr Mundine is not yet a member of the Liberal Party but his application was being processed on Tuesday. The Indigenous leader and businessman lives on Sydney's north shore,but has ancestral ties to the Shoalhaven area and family living in Gilmore.

However,some local Liberals will baulk at the imposition of an outside candidate."I doubt he's even seen the Princes Highway in the last 10 years,"one local Liberal said.

Mr Mundine was the ALP national president in 2006-07,and later expressed interest in becoming a Labor senator,but was bested by former NSW premier Bob Carr. He left the Labor Party in 2012 after 20 years,saying it was"no longer the party I joined".

The deal to insert Mr Mundine as the candidate was spearheaded by Mr Morrison's centre-right faction but has been agreed to by the dominant moderate faction.

"This is what the PM wants,"a senior member of the moderate faction said on Tuesday.

In the months after last year's leadership coup against Malcolm Turnbull,Mr Mundine called the former PM"Malcolm Termite"and said he should"crawl back into his little hole". Many of his tweets express support for Mr Morrison and his government's policies.

The Liberals hold the seat of Gilmore by 0.7 per cent and it was widely expected to fall to Labor unless Mr Mundine can salvage the party's fortunes.

Mr Schultz – the son of former state and federal Liberal MP Alby Schultz – was chosen by local members on December 12,but the party had not yet rubber-stamped his endorsement. He has been contacted for comment.

Real estate agent Grant Schultz was preselected by local members in December.

Gilmore has been in Liberal hands since it was won by Joanna Gash in 1996. It has only ever been held by Labor for a single term,when Peter Knott won the seat by 600 votes in 1993.

Ms Sudmalis,the incumbent since 2013,announced last year she would resign,citing bullying and intimidation within the Liberal Party among the reasons for her decision.

Labor's candidate for Gilmore,Fiona Phillips,was preselected in March 2017 and set up her campaign office this month in Nowra.

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