Comments made by a New Zealand First MP about Muslim men were ''racist and extremely objectionable'', Federation of Islamic Associations of New Zealand president Dr Anwar Ghani said.
Richard Prosser said young men who were Muslim, "look like a Muslim" or came from a Muslim country should not be permitted to fly on "western" airlines, in an article he wrote for Investigate magazine.
Dr Ghani said New Zealand could stand to lose millions of dollars worth of business in the education sector and compromise the country's growing economic relationship with the Middle East.
''You would expect people that come to Parliament are deep thinking people and they have a wider appreciation of the community in New Zealand and the global socio-political scene,'' he said.
Dr Ghani - who lives in Hamilton - said although the city enjoyed a very good inter-faith working group, and reasonably good ethnic integration, comments like Prosser's ''create distrust''.
''(And) once you have distrust in the community you cannot enjoy peace.
''His (Prosser's) comments are undermining the peaceful nature we have in this community.''
NZ First leader Winston Peters said Prosser had ''wrongfully impugned millions of law-abiding, peaceful Muslims''.
In 1998 a fire gutted a Hamilton inner-city mosque, shocking members of the city's Muslim community.
At the time, Hamilton deputy fire chief Phil Glover said traces of an accelerant were found inside the building.