Federal Labor says Julie Bishop’s position as deputy opposition leader is “untenable” after she accused Prime Minister Julia Gillard of criminal conduct when she was a lawyer in the 1990s.

Ms Bishop has claimed that Ms Gillard deliberately did not open a file when she helped set up a union slush fund because she wanted to hide the fact it would be used to “siphon” money.

The association was “unauthorised” and in breach of West Australian laws. Ms Bishop on Tuesday also admitted she met the notorious former Australian Workers’ Union bagman Ralph Blewitt on Friday.

“The deputy leader of the opposition thinks it’s acceptable to accuse the prime minister of engaging in a criminal act on the basis of her star witness being this self-confessed fraudster and yet no evidence has been produced to back up that claim,” cabinet minister Anthony Albanese told reporters in Canberra.

“Julie Bishop’s position as deputy leader of the opposition is simply untenable.

“(Opposition Leader) Tony Abbott either has to back her up 100 per cent or take action and dismiss her.”

Mr Albanese said Ms Bishop had needed to “put up or shut up”.

“There are consequences for Ms Bishop’s political situation if it is not backed up.”

Whether Ms Gillard might take legal action was a matter for the prime minister, Mr Albanese said.

He also called on Ms Bishop to further explain who instigated Friday’s meeting with Mr Blewitt and if anyone from Mr Abbott’s office was present.

Ms Bishop showed an “extraordinary lack of judgment” in meeting the former AWU official and making serious accusations without being able to back them up.

The Labor MP further wants to know “what has brought him (Mr Blewitt) back to Australia” to speak with the police and media.