Sydney: Australia now recognises west Jerusalem as Israel's capital, Prime Minister Scott Morrison said on Saturday, but a contentious embassy shift from Tel Aviv will not occur until a peace settlement is achieved.
Canberra became one of just a few governments around the world to follow US President Donald Trump's lead and recognise the contested city as Israel's capital, but Morrison also committed to recognising a future state of Palestine with east Jerusalem as its capital.
"Australia now recognises west Jerusalem — being the seat of the Knesset and many of the institutions of government — is the capital of Israel," Morrison said in a speech in Sydney.
Both Israel and the Palestinians claim Jerusalem as their capital.
Most foreign nations avoided moving embassies there to prevent inflaming peace talks on the city's final status — until Trump unilaterally moved the US embassy there earlier this year.
"We look forward to moving our embassy to west Jerusalem when practical, in support of and after final status of determination," Morrison said, adding that work on a new site for the embassy was under way.
In the interim, the prime minister said, Australia would establish a defence and trade office in the west of the holy city.
"Furthermore, recognising our commitment to a two-state solution, the Australian government is also resolved to acknowledge the aspirations of the Palestinian people for a future state with its capital in east Jerusalem," he added.
Morrison first floated the shift in foreign policy in October, the move angered Australia's immediate neighbour Indonesia — the world's most populous Muslim nation — and put a halt on years-long negotiations on a bilateral trade deal.
The country's foreign ministry responded on Saturday by saying it "notes" the decision.
Canberra on Friday told its citizens travelling to Indonesia to "exercise a high degree of caution", warning of protests in the capital Jakarta and popular holiday hotspots, including Bali.
Morrison pointed to Australia's military history in the region, and the country's interest in a "rules-based" order in the Middle East, to support the shift in foreign policy.
The prime minister vowed Australia would no longer abstain from UN resolutions he said "attacked" Israel, but would instead oppose them, including the "Jerusalem" resolution, which asks nations not to locate diplomatic missions to the holy city.
"The UN General Assembly is now the place where Israel is bullied and where anti-Semitism is cloaked in language about human rights," Morrison said.
'A face-saving exercise'
Morrison first announced he was "open-minded" to an embassy shift to Jerusalem ahead of a crucial October by-election in a Sydney constituency with a sizable Jewish population.
Israeli Prime Minister Benjamin Netanyahu at the time hailed the initiative, but Morrison faced mounting backlash at home, forced to play down the foreign policy manoeuvre as part of an election campaign.
Morrison's Liberal party candidate was a former Australian ambassador to Israel, who went on to lose the seat, delivering the prime minister a minority government.
Commentators said Saturday that the embattled PM -- who faces the prospect of an election drubbing next year — was "saving face", sticking to the status quo by holding back an embassy move, and easing tension with his distinction between east and west Jerusalem.
"Essentially not much has happened," Rodger Shanahan from Sydney-based think tank the Lowy Institute said of Morrison's announcement.
"It is a combination of him being caught out by making an injudicious remark at a by-election, and then having to walk back from it" he told AFP.
The opposition Labor party slammed Morrison for putting "self-interest ahead of the national interest".
"Recognising West Jerusalem as Israel's capital, while continuing to locate Australia's embassy in Tel Aviv, is nothing more than a face-saving exercise," shadow minister for foreign affairs Penny Wong said in a statement.
"This is a decision which is all risk and no gain," she said, adding it puts Australia "out of step" with the international community.
The General Delegation of Palestine to Australia and New Zealand on Saturday released a statement linking Morrison's decision to domestic politics.
"Many strong arguments have been advanced between Prime Minister Scott Morrison's floating the idea during the Wentworth by-election campaign and now and most of them have exposed the faulty thinking and flimsy pretexts that underpin the case of the proponents of this move."