Australia will arrest anybody who "looks like Saddam Hussein," Prime Minister Dr Mahathir Mohamad said today after two Malaysians were refused entry at Sydney airport, allegedly on suspicion of being Muslim terrorists.

"I expected this to happen because they see anybody who is a little bit coloured and has a moustache looks like (Iraqi President) Saddam Hussein, they will arrest. That's their way," Mahathir told reporters.

His remarks were the latest in a series of broadsides aimed at Australia, including a suggestion that Prime Minister John Howard saw himself as "a white man sheriff in some black country."

Mahatir was then responding to Howard's threat to launch pre-emptive strikes against foreign-based terrorists who posed a threat to Australian interests.