Auburn MP Barbara Perry has refused to back down from a potential preselection battle against Labor leadership front-runner Luke Foley, despite claims by her colleagues the "pariah" move would threaten the party's fortunes.
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Ms Perrysaid on Monday that she was acting in the party's best interests by signalling her intent to stand for preselection in Auburn, potentially pitting herself against Mr Foley, who is expected to run if he is elected party leader at a January 5 caucus meeting.
The standoff came as party leadership contender Steve Whan withdrew from the contest, saying Mr Foley's candidacy meant he could not gain majority caucus support.
The Labor leadership is up for grabs just three months out from the state election, following John Robertson's resignation over revelations he signed a letter of request for Lindt cafe gunman Man Haron Monis in 2011 as his local MP.
The party faces a stiff challenge to reassert itself before March. Many insiders expect Ms Perry to stand aside if Mr Foley becomes leader but she has so far refused to guarantee this.
Party sources said many believed Ms Perry was being "destructive" and should allow Mr Foley to be preselected unopposed if he becomes party leader.
"I think she would be regarded as a bit of a pariah if she stood in the way of him having a lower house seat," one source said.
Mr Foley told Fairfax Media on Monday that Ms Perry was a friend, and he was "entirely comfortable" with her staying in the Auburn race before the leadership ballot. He did not comment on whether he would maintain this view if he became leader.
Ms Perry has been involved in an acrimonious preselection fight with Auburn councillor Hicham Zraika, in which she accused him of branch stacking. Mr Zraika denies the claims.
It is understood the ALP national executive is likely to cancel that preselection and order a new rank-and-file ballot involving Mr Foley, if he becomes leader.
Ms Perry has taken her branch-stacking allegations against Mr Zraika to the party's internal Review Tribunal after they were dismissed by a lower-tier tribunal.
She rejected the suggestions levelled against her, saying she was acting for "the good of the party now and into the future".
Ms Perry said far from being destructive, "I have been constructive in taking the action before the review tribunal", adding the matter has "always been about more than one individual".
She said her party, which has been working to shrug off its scandal-ridden reputation since leaving office, should maintain "the highest standards of integrity" in the preselection and review tribunal processes.
The tribunal hearings have been adjourned until January 21.
Despite the unresolved allegations against Mr Zraika, there has been speculation he would be given a winnable spot on the upper house ticket if he withdraws from the Auburn race.
It is understood that such an offer would probably be withdrawn should adverse findings be made against him. However, there are fears that Mr Foley's pending leadership could be tainted if he is linked to any deals involving Mr Zraika.
Mr Foley is backed by ALP head office, and appears set to win the caucus ballot against Maroubra MP Michael Daley, from the party's right.
Mr Foley is a leading member of the Left faction but has substantial support from the Right, and his leadership bid stole substantial caucus support from Mr Whan, of the Right faction.
Withdrawing from the leadership ballot on Monday, Mr Whan said a challenge by Mr Foley made it "extremely difficult for me to win".
