A Queensland grandmother behind the recently-formed Love Australia or Leave Party says the rival Australian Muslim Party will "segregate" the nation further.

Party founder Kim Vuga, who appeared on the last season of the SBS reality show Go Back To Where You Came From, told Fairfax Media she was proudly "anti-Islam".

"We're already a nation divided. We haven't sorted out the Muslim issue. Our cultures are incompatible and we need to be sorting out the Muslim problem that exists here before we take any more [refugees and Muslim immigrants]," she said

"I will be interested to see what their policies are but to go ahead and form a party for Muslims is segregating themselves further."