"The Victorian Liberal Party here are a shambles, we've seen them fighting each other," he told reporters on Friday.
His comment follows Victorian Liberal leader John Pesutto's bid to eject MP Moira Deeming from the party following her appearance at an anti-transgender rally in Melbourne on Saturday.
The heated event made nationwide headlines after the attendance of neo-Nazis who lined up and made a salute outside parliament.
Ms Deeming was present but has denied any Nazi alignment and denounced the salute.
Mr Pesutto accuses her of "conducting activities in a manner likely to bring discredit" to the party over her association with rally figures with alleged links to extremists.
He presented a 15-page dossier of supportive "evidence" detailing Ms Deeming's involvement in the rally.
Ms Deeming has since denounced Nazism and denied any ties to far-right groups but refuses to condemn British anti-trans activist Kellie-Jay Keen, who headlined the event.
A Victorian Liberal party caucus meeting on Monday is due to vote on a motion to expel Ms Deeming.
Mr Albanese was in Melbourne campaigning alongside Labor's candidate for the April 1 Aston federal byelection.
An urgent push to ban Nazi symbols has reached federal parliament following Saturday's rally and emotions are high.
As debate continued in Canberra's upper house, Liberal senator Sarah Henderson started crying over mention of the text messages she had sent Mr Pesutto in support of Ms Deeming.
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