Labor leader Bill Shorten has lost faith in Sam Dastyari and sacked him from two senate leadership roles, but rejected calls to dump him from the party over his involvement with a Chinese political donor.
Mr Shorten asked the senator to resign as opposition deputy whip and chairman of a senate committee after it was revealed he defied Labor policy when he defended China's stance on the South China Sea at a media conference attended by Communist Party-linked political donor Huang Xiangmo.
He had previously told Mr Shorten and the media he had only "incorrectly" mumbled an answer on the South China Sea, but audio released on Wednesday showed he clearly backed China's position.
The opposition leader said he was confident Senator Dastyari had not broken any law and was not a security risk, but the lapse of judgment "does require punishment".
"I have lost faith in him and I do think his judgement was erroneous ... that is why I have sacked him again," Mr Shorten said on Thursday.
"He has a long, long journey to rebuild trust."
Mr Shorten removed Senator Dastyari from Labor's front bench for five months last year after it was revealed Mr Huang paid some personal debts for him.
Attorney-General George Brandis said it was "pathetically weak" for Mr Shorten to give Senator Dastyari another "summer sabbatical" to overcome his latest embarrassment.
Senator Brandis backed Prime Minister Malcolm Turnbull's call for Senator Dastyari to resign not simply from his Labor posts but from parliament because of the "disloyal conduct of the highest order".
"Dastyari has shown he does not put Australia first and he does not owe his first loyalty to Australia," Mr Turnbull said.
Senator Dastyari was forced by parliament on Thursday to make a detailed explanation of his involvement with Mr Huang.
The Labor powerbroker also came under fire over reports he told Mr Huang they should leave their phones inside when they met at the businessman's Sydney mansion in October last year because of likely bugging by Australian intelligence agents.
The reported exchange took place during a face-to-face meeting weeks after Senator Dastyari resigned from the frontbench over his earlier dealings with Mr Huang.
Senator Dastyari told parliament on Thursday he had never had any briefing from any Australian security agency ever and never passed on classified information.
He said he had met with Mr Huang to tell him face-to-face it was not appropriate for them to have any future contact, and neither he nor his office has had any contact since then.
The senator admitted he had made comments in breach of Labor policy which was a "significant mistake".
He also took personal responsibility for the "mischaracterisation" of the media conference comments.
Independent senator Derryn Hinch said Senator Dastyari's initial "two-minute noodle address" was insufficient.
Senator Dastyari was forced to quit the Labor shadow ministry in September last year over revelations Chinese donors paid his legal and travel bills.
The government is expected next week to introduce laws to ban foreign donations to candidates and political parties.