Under pressure to step down following comments, which when translated from Arabic, likened immodestly dressed women to uncovered meat, Sheikh Ehilali, said he would only resign when the world is "clean of the White House".
Mr Debnam said the Mufti’s anti-American statement was an attack on western society.
"The entire community is rightly horrified and repulsed by the Sheik's comments about women and Western society," Mr Debnam said.
"The Sheik's refusal to apologise makes it completely inappropriate, while he remains in his current position, for his mosque or any groups associated with it to continue to receive any public funding."
Mr Debnam told ABC Radio that he had met with the Sheikh Ehilali when previous comments he made were deemed inflammatory.
"I met with him and asked him: please be careful with what you say, please tone down your language."
"Well that's the last time. I think now he's finally said enough, he's been consistent over years, he's really got to go," Mr Debnam said.
Sheikh Ehilali’s views were completely out of step with mainstream Muslims and he should not return to Australia after a planned overseas trip, Mr Debnam added.
The Sheik is taking three months leave during which time he will visit Mecca.
Powerful friends
Meanwhile, it’s been revealed that leading Labor figures Paul Keating and Leo McLeay lobbied for the Mufti’s residency in the 1980s.
They demanded then-immigration Minister Robert Ray grant the sheik residency in 1989 and were furious when he refused, News Limited papers reports.
It was the second time the party leaders had attempted to intervene on behalf of the sheik, according to Labor sources cited in the report.
Sheikh Ehilali arrived in Australia in 1982 but did not gain residency until 1990.