David McCracken is Development Director at the Barangaroo Delivery Authority and is reported to have used the phrase "nigger in the woodpile" at a planning meeting on Friday for the $6 billion Indigenous cultural space.
The comment has angered members of the Indigenous community, including arts advocate Bronwyn Bancroft who believes Mr McCracken should resign.
"In any context whether it's in a private or public context to work against Aboriginal people in terms of the way that he's actually spoken...he should be resigning really," she said.
"Because it's an attack on all Aboriginal people, it's like we dont really want to entertain the idea that we want to speak with you."
African-American staffer at the University of Technology Sydney, Brigette Sanch, was present at the meeting and walked out after hearing the comment.
The University has backed its staffer saying that it abhors racism.
The Bangararoo Delivery Authority, for which Mr McCracken is in charge of Indigenous engagement, says the comment is completely unacceptable.
The Authority says that Mr McCracken has been reprimanded and has agreed to undergo counselling.
"If he's in a sphere of influence and he's talking with other government officials etcetera, if he actually undergoes and installs respect for Aboriginal people in his thinking then that's a good thing," said Bronwyn Bancroft.
The precinct is named after Bennelong's wife Barangaroo and is committed to providing development opportunities that are expected to include tourism and a cultural centre for Indigenous peoples.
The project's advisory panel includes prominent Indigenous identities such as the Bangarra Dance Theatre's resident curator Hetti Perkins. It's steering panel also includes Indigenous politician Aden Ridgeway.
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