Rugby Australia said it would be "madness" for any Pacific Island team in a New Zealand-led revamp of Super Rugby to be based in Auckland and instead should play out of Sydney.
Plans for a Pacific side were unveiled Friday by New Zealand Rugby in a proposed shake-up of the flagship southern hemisphere club tournament from 2021 that would cull South African teams and Argentina's Jaguares.
They would feature in a new-look competition containing New Zealand's five existing teams, and two to four from Australia.
NZR chief Mark Robinson declined to say what he had in mind for the Pacific team, but previous proposals have suggested players from Fiji, Samoa and Tonga could be based in Auckland, despite potentially hurting the Blues' fan base.
RA chairman Hamish McLennan said a Pacifika side would be better off in western Sydney, which boasts a large contingent of Fijians, Samoans and Tongans, and only from 2022.
"We have a large and wonderful Pacific Islander population in Sydney and I think that would strengthen rugby long term," he told the Sydney Daily Telegraph.
"Basing them in Auckland would be detrimental to the (Auckland) Blues, it would be madness for the Blues."
Reports in New Zealand have said ambitious new franchise Kanaloa Hawaii, backed by a slew of former All Blacks, was in discussions with NZR about filling the void of a Pacific Island team.
"I think the Pacifika idea is brilliant, but I would be housing them in Sydney," added McLennan.
"And because of COVID, the fact we don't know what's happening, I am not sure we could guarantee them for next year."
Australia has ruled out having only two of its Super Rugby teams in any new competition, and delaying a Pacific side until 2022 would potentially allow all five -- Queensland Reds, ACT Brumbies, Melbourne Rebels, NSW Waratahs and Western Force -- to play next year.
"Hopefully we are moving in the right direction, an eight-team competition with two Australian sides doesn't work for us," McLennan, who last week described the relationship with NZR as "a bit master-servant", told the newspaper.
"So if 10 teams is on the table then we have the chance to create a world-class competition which will be highly valued and extremely exciting."
If New Zealand insist on a maximum of four Australian teams, then Rugby Australia would face having to either axe a side, merge two teams or stick to its own domestic competition.
The coronavirus halted this year's Super Rugby season in March, forcing New Zealand and Australia to set up their own domestic versions, while South African clubs and the Jaguares remain sidelined.
Robinson blamed the COVID-19 pandemic for the "extremely tough" decisions made around the new competition, saying it meant long-distance travel was impossible.