NSW Labor will consider banning councillors from spending ratepayers' cash on designer goods after revelations of spending on luxury items sunk the aspirations of high-profile upper house candidate Khal Asfour.
Canterbury Bankstown mayor Khal Asfour, Labor's candidate for the upper house, pulled out on Friday.
Labor leader Chris Minns said he had private discussions with Mr Asfour on Thursday night, but declined to say what was said between the pair.
"I think candidates ... would expect to have private conversations with the leader of the party to remain private."
Mr Minns said he took particular exception to reports Mr Asfour has spent taxpayer money on designer clothing.
"Clothing allowances are generally for hard hats and personal protective equipment, not for clothes that you wear every day in your professional capacity."
He defended backing the western Sydney mayor until two months out from polling day, saying he only learned of the reports about Mr Asfour's expenses on Thursday.
"I didn't know about these revelations. That's obviously an important part of this in any political campaign," Mr Minns told reporters.
"At any stage of the election cycle, you're going to have situations like this."
A spokesman for Mr Asfour said had been subjected to a vicious smear campaign and relentless leaking.
"The latest headlines are the last straw," the spokesman said.
"The mayor is vehemently denying any wrongdoing and has at all times adhered to the policy set by council, a policy scrutinised by the Office of Local Government."
It comes after former Labor MP Tania Mihailuk used parliamentary privilege last year to claim Mr Asfour was had property links with disgraced former Labor powerbroker Eddie Obeid.
Mr Asfour was cleared of misconduct following an upper house inquiry late last year.
Ms Mihailuk was later kicked out of the Labor Party and has since joined One Nation.
One Nation MP Mark Latham said Mr Asfour should stand down.
The Labor leader dismissed Ms Mihailuk's claims on Friday, saying they had been proven false by an Independent Commission Against Corruption investigation and an independent inquiry.
"At the end of the day, you can't say that you've got a concern about a candidate in relation to (property) developers, but then say, 'What I really meant was that it was a concern about expenses'," Mr Minns said.
A new Labor candidate for the upper house seat could be announced as early as Friday.
Earlier this week, Labor's candidate for Manly, Caroline Yarnell, also bowed out of the race after a flurry of cryptic social media posts.
Dr Yarnell said she still hoped for Labor to win the state election in March.
Mr Minns signalled his party would look at creating legislation to stop councillors from charging ratepayers for expenses in the next term of government.
"Expenses issues in councils in NSW are an issue," he said.
"We want to look at them in government because I don't think it's appropriate to levy ratepayers to these charges."
