Senator Fatima Payman quitting Labor gives Prime Minister Anthony Albanese “one hell of a headache” if her defection leads to a new fringe party, according to Sky News host Steve Price.

Ms Payman has not ruled out working with a group planning to run against Labor MPs in seats with large Muslim populations, saying she does not have any intentions of collaborating with them “at this point”.

“If she does endorse that movement or join it as a Labor Senator turned martyr it could change forever Australia's political landscape,” Mr Price said.