Pharmacist Manir Husayn was closing his shop in Wollongong, south of Sydney, when he was attacked by a group of men.
"They were waiting for me and they blocked the driveway," Husayn said. The attackers called him a "bloody terrorist."
The attack coincided with the second anniversary of the September 11 attacks.
Husayn said Australia's 200,000 Muslims have been living in fear ever since the attacks on US targets.
"Nowadays they are leading a life which is full of fear, anger and frustration," he said, criticising police for being slow to respond to his call for help.
Islamic Council of Victoria spokesman Bilal Cleland said such attacks should be treated as acts of terrorism by the authorities.
"Nowadays they are leading a life which is full of fear, anger and frustration"
"Why are'nt anti-terrorism laws used against these racists," he said.
"What sort of message will this send to the peoople of Asia if Muslims can be bashed up and its not treated as a terrorist incident," he asked.
Meanwhile, an Australian Muslim cleric has been accused of plotting to recruit fighters for al Qaida.
The Australian newspaper reported that Sheikh Mohammed Omran, the leader of a radical Muslim congregation in Melbourne, travelled to London to meet a suspected British al-Qaida operative.
The two reportedly planned to recruit members in Australia.
Omran however has denied any links to the al-Qaida.