Norman, who took silver in a 200 metres race overshadowed by its controversial medal ceremony, died of a heart attack in 2006.
He wore the 'Olympic Project for Human Rights' badge as Americans Tommie Smith and John Carlos gave their clench-fisted salute, for which he was widely ostracised.
It was thought Norman was consequently snubbed for 1972 Munich Games, although the Australian Olympic Committee said he was not selected "due to lack of form."
Australian politicians praised Norman's "heroism and humility" on Monday during a debate on a possible posthumous apology.
Bronze medallist Carlos told ABC Radio on Tuesday that Norman's treatment after Mexico City had scarred him for life.
"I think it mortally wounded him," Carlos said. "I don't think he was as bitter as he was hurt... and I don't think he ever recovered."
Norman quit athletics in protest after being overlooked for Munich. Carlos added that there was no Australian who should be "honoured, recognised, appreciated" more than Norman.
Lawmaker Andrew Leigh told federal parliament on Monday that Norman was punished for standing in solidarity on the podium with Smith and Carlos.
"It was a moment of heroism and humility that advanced international awareness for racial inequality," Leigh said in presenting his motion for an apology.