Rugby Australia chairman Hamish McLennan says Sydney should be the base for a new Pasifika team even though there is an assumption in New Zealand that it will be located in South Auckland.
There are strong Samoan, Tongan and Fijian communities in the Sydney western suburbs in particular.
McLennan is also calling on the formation of the team to be delayed for a year.
And one of Sydney's biggest newspapers has described New Zealand as displaying "sheer arrogance" in trying to dominate the competition to replace Super Rugby.
McLennan said: "We have a large and wonderful Pacific Islander population in Sydney and I think that would strengthen rugby long term.
"Basing them in Auckland would be detrimental to the Blues, it would be madness for the Blues.
"I think the Pasifika idea is brilliant, but I would be housing them in Sydney. And because of COVID, the fact we don't know what's happening, I am not sure we could guarantee them for next year.
"Maybe we should be planning for them to be involved from 2022."
Initial proposals emerging out of New Zealand Rugby's Aratipu report centred on an eight team competition which cut the number of Australian's franchises from five to two.
The Telegraph raged:
"No-one should be kidding themselves that Australia's five-team domestic competition is at the same standard as New Zealand's version, but that's hardly the point.
"The sheer arrogance of the Kiwis in suggesting that Australia's teams aren't worthy of joining their planned competition for 2021 has got up everyone's nose.
"If the Kiwis want to go it alone, then hasta la vista.
"Australian rugby will be just fine without them and this weekend (of rugby action) was the proof."
McLennan however is hopeful of reaching an agreement to secure the future of all Australian franchises.
"Hopefully we are moving in the right direction, an eight-team competition with two Australian sides doesn't work for us," he said.
"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."