Key points:
- Audio recording reveals Dastyari backed China's position on territorial claims
- 'Deeply disappointed' Shorten sacks Dastyari as deputy whip but he remains in the Senate
- Turnbull says Dastyari must step down
Controversial Labor figure Sam Dastyari has formally resigned from his senior roles in the Senate on opposition leader Bill Shorten’s instruction, after a leaked audio recording revealed the senator made strong comments in support of China's territorial claims in the South China Sea.
Labor leader Bill Shorten said he was "frustrated" by Sam Dastyari's actions and said the demotion to the backbench was an appropriate punishment.
"I am deeply disappointed with Senator Dastyari, as leader of the Labour Party, that he has put me in a position where I have to sack him, again," Mr Shorten said.
"I think he has got a long journey to take before he can rebuild and that is why he is on the backbench."
The NSW senator had previously downplayed the comments he made in June last year, saying he "incorrectly" mumbled an answer to a question.
But the newly released tape reveals the senator made a clearly articulated, well rehearsed statement.
On Thursday morning, Sam Dastyari told the Senate chamber he was "not without fault" and confirmed he would resign from two positions: as Labor's deputy whip in the Senate, and as chair of a Senate committee into the future of journalism.
"A recent audio recording shocked me as it did not match my recollection of events," he said.
"When a public official makes a statement that contradicts events there are consequences."
"For me, the consequences were being called last night by Bill Shorten and being asked to resign from my position in the Labor Senate organisational leadership."
The leaked audio reveals the senator made a spirited defence of China's position on the South China Sea, which is contested by a number of Asian nations.
Both Labor and the Coalition support a "rules-based" order in the region, and support the free passage of trade ships through the contested waters.
"The Chinese integrity of its borders is a matter for China," Senator Dastyari told a room full of Chinese reporters on June, 2016.
"The role that Australia should be playing, as a friend, is to know, that with the several thousand years of history … where it is and isn’t our place to be involved,” Mr Dastyari said in the recording.
Shorten says demotion was 'significant punishment'
The Opposition Leader was visibly frustrated when talking about Senator Dastyari in Adelaide on Thursday afternoon.
"For him to be put back on the backbench, I think that is a significant punishment."
Mr Shorten said his colleague was now "at the back of the queue" on the backbench.
"I think he has a long journey to restore my confidence in him," he said.
But the opposition leader also said he rejected the imputation from some Coalition politicians that Senator Dastyari had been disloyal to Australia.
Forced to reappear in the Senate
After Senator Dastyari's first appearance in the Senate, the Coalition and crossbenchers were not satisfied with his explanation and successfully moved a motion to force him to reappear and explain himself further.
The Senator reinforced that he regretted his actions, but did not provide much new information on his contradiction of Labor party policy.
“I let myself down and my party down and by contradicting party policy and I paid the appropriate penalty.”
Turnbull pushes for total resignation
The NSW senator has not resigned from the Senate itself, depite demands from senior figures in the Turnbull Government.
Attorney-General George Brandis said Senator Dastyari's stepping down from the organisational roles was "not the end of the matter".
Prime Minister Malcolm Turnbull is calling for Senator Dastyari to quit politics altogether.
"Dastyari should resign from the Senate," the Prime Minister said.
"This is a senator who has made it abundantly clear that his first allegiance is not to Australia."
"If he refuses to resign, Shorten should dump him from the Labor Party and let him languish in contempt on the
crossbench."
Senator Brandis said the leaked audio was evidence Chinese donor Huang Xiangmo was "almost literally pulling the strings" of the outspoken Labor senator.
"These were deliberate, considered, scripted remarks and their purpose was to send a message through the Chinese media that were a Labor government to have been elected, its foreign policy in relation to China would be at variance from what had been announced by the [then] Labor shadow minister Senator Conroy,” he said.
