Federal Labor MP Anne Aly has accused her party of hypocrisy over a plan to parachute former New South Wales premier Kristina Keneally into a safe multicultural seat in Sydney's south-west while pushing aside a local candidate.

Senator Keneally, who lives on the Northern Beaches, has been vying for a seat in the House of Representatives and yesterday confirmed her intention to run for the electorate of Fowler at the next federal election. 

Retiring local member Chris Hayes had been pushing for Tu Le, a local lawyer of Vietnamese heritage, to be his successor in the electorate, which encompasses the suburbs of Cabramatta and Fairfield.

Ms Aly blasted Senator Keneally's move and called on Labor to do more than "just pay lip service" to multiculturalism.

"Diversity and equality and multiculturalism can't just be a trope that Labor pulls out and parades while wearing a sari and eating some kung pao chicken to make ourselves look good," she told the ABC.

"This is a huge failure for Labor when it comes to diversity and inclusion."

While the plan has angered some within the parliamentary Labor party, few MPs have been willing to publicly criticise it.

Ms Aly, who grew up in the electorate of Fowler and was the first Muslim woman elected to the federal parliament, said she couldn't stay silent on the matter.

"I'm not going to be quiet on this because it's not just that it's personal, it is that I have a responsibility to speak up and hold Labor to account on diversity," she said.

"Frankly, for the Labor Party to be in a position where they are pushing aside a community representative from one of the most multicultural electorates is hypocrisy as far as I'm concerned."

Ms Aly argued people from culturally and linguistically diverse backgrounds "are always given the marginal seats and put on the unwinnable spots on the Senate ticket".

"It can't just be a matter of whenever there is a multicultural seat or seat with high diversity that tends to be very Labor-friendly and tends to be a safe seat, you can't just push aside a community member and have that seat represented by somebody of the party's choosing," she said.

She described Senator Keneally and Ms Le as "two very intelligent and capable women" and said they both deserved to be in parliament.

"A novel idea might be a man moving over, stepping aside, to accommodate both of those women in our parliament," she said.

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Announcing her decision to nominate for preselection, Senator Keneally said she had been approached by local ALP branch members who encouraged her to run for the seat of Fowler.

"I want to step up and fight for Fowler in the House of Representatives, for every suburb, every faith community, every small business, every family," she said.

"Serving this community, living in this community, and fighting for them is what I want to do."