Federal Labor MPs have warned the party risks handing Scott Morrison the next election unless it urgently reconnects with blue-collar voters, conceding a weekend byelection in NSW showed the party was out of touch with its base.

State Labor leader Jodi McKay was digging in on Sunday after a 7 per cent drop in the party’s primary vote in Saturday’s Upper Hunter byelection, with the Nationals holding the seat and firming up Gladys Berejiklian’s grip on power. Labor’s primary vote was just 21.7 per cent.