An ugly stoush is brewing in the NSW Liberal Party as Treasurer Dominic Perrottet mulls a pre-selection challenge on frontbench colleague Ray Williams.

Mr Perrottet holds the seat of Hawkesbury, but the ABC understands he is on the brink of nominating for Mr Williams' neighbouring seat of Castle Hill, which sits on about double the margin.

Senior Liberal sources have warned of "armageddon" within the party if Mr Perrottet puts himself on a pre-selection collision course with the Minister for Multiculturalism.

Several powerbrokers have been pressuring Mr Williams to retire to make way for Mr Perrottet as part of a factional deal involving the pre-selections for a number of seats.

But Mr Williams is digging his heels in, telling the ABC he is "absolutely" nominating for his own seat.

"I am committed to continuing to represent the people of the electorate that I have lived in all my life," Mr Williams said.

"They've returned my loyalty by making it one of the safest Liberal seats in the country.

"The last thing I want to do is run away."

Castle Hill is held on a margin of nearly 30 per cent, while Mr Perrottet has a 17.8 per cent margin in Hawkesbury.

The Government is still reeling after losing the Wagga Wagga by-election earlier this month to independent Dr Joe McGirr.

Dr Joe's campaign van. He says the Liberals felt they "owned" the seat. ( Facebook )

The Liberals had held that seat for more than six decades but were punished at the polls with a giant swing of almost 30 per cent.

Mr Perrottet formerly held Castle Hill but swapped to Hawkesbury after a redistribution and a factional deal before the last election.

Sources close to Mr Perrottet said he has close family and community ties in Castle Hill and moving back into the seat would reduce travel time and allow him to spend more time with his wife and five children.

But those supporting Mr Williams said it would be a "bad look" if the Treasurer moved on the seat, even though it sits on a healthy margin.

The Premier Gladys Berejiklian is caught in the middle, with both camps demanding her support.

Mr Perrottet has not yet lodged a nomination form for either his current seat or Castle Hill, but has until 5:00pm ton Friday to do so.