The situation prompted this newspaper and two rival Jewish newspapers to publish the same unprecedented front page condemning the "existential threat" Jeremy Corbyn's Labour now poses to British Jewry.
Speaking to the JC on Sunday, Mr Austin said: "I think this is a real crisis - and the leadership have got to sort it out.
"I think the most pernicious thing is that people have been dragged into terrible positions because of their support for Jeremy.
"They think this is all being whipped up because that is what they have been told.
"Instead of dealing with the racism they end up attacking the people who are complaining about it.
"I think that is the most awful thing about this. How this become such a crisis in the Labour Party - I just despair."
The Dudley North MP, who is the adopted child of a Jewish refugee, said he got into an "emotional, heated discussion" with Mr Lavery shortly after Labour's national executive committee agreed to reject the Party's adoption of the international Holocaust Remembrance Alliance definition of antisemitism on July 17.
He confirmed reports that he told the chairman Labour was "becoming a sewer" under Mr Corbyn's leadership.
Mr Austin said he had berated the Party's chairman after he suggested he could not influence the decision as he was not himself a member of the NEC.
"I told him I thought the NEC decision was a disgrace," said Mr Austin. "He said 'I'm not on the NEC' and I said 'But you are chair of the party.'
"It was that sort of discussion. The account that suggests I swore in his face is not true. I did not swear at him."
On Sunday, fellow Labour MP Peter Kyle wrote on Twitter that Mr Austin's exchange with Mr Lavery was "far from 'abusive'".
The JC, who first broke the news of the confrontation earlier this month, also spoke with a second MP who suggested Mr Lavery had been seen acting in an aggressive manner and had appeared to follow Mr Austin on the night the bust-up took place.
Mr Austin said he believed the Labour leader had "spent a long time defending, supporting people on the extreme fringes some of whom have said or have done things that are antisemitic."
Asked if he now believed that we are witnessing a "purge" of Jewish Labour MPs and their supporters by the Party's machine, he said:"I think that is a real crisis. "They have got to sort it out.
"I think they have got to take antisemitism much more seriously and they've got to deal with the people responsible for this crisis much more quickly.
"They have got listen to what the Jewish community is saying, adopt the IHRA definition with full examples.
"They should respond to the original request made by the (Jewish) representative organisations - and they should boot the racists out of the Labour Party.
"If they want it resolved - then resolve it. If you keep saying you want to deal with it - then deal with it."
