MORRIS IEMMA is expected to dump Michael Costa today after late-night talks with his Labor colleagues convinced the Premier that he had no choice if he wanted to remain leader.

A senior party source told the Herald that Mr Iemma had accepted that he could not revive his beleaguered Government if Mr Costa remained.

It was not clear late last night if Mr Iemma would sack Mr Costa or if he would allow his Treasurer a face-saving resignation.