The Palestinian delegation to Australia has warned the nation risks becoming an "international pariah" on foreign policy in the Middle East, if it moves its embassy in Israel to Jerusalem.
Prime Minister Scott Morrison has indicated he is open to moving Australia's diplomatic presence from Tel Aviv, saying he finds the arguments in favour of such a plan "persuasive".
The move would follow the decision by United States President Donald Trump, who reversed decades of foreign policy by opening a US embassy in Jerusalem earlier this year.
The US decision to recognise Jerusalem as Israel's capital infuriated Palestinians and other Middle Eastern nations because the Palestinians want to one day establish their own capital in the city.
In a statement, the representative of the Palestinian delegation in Australia, Izzat Abdulhadi, described it as "short-term political gain" that would be "outweighed by the detriment both to Australia's international standing".
"Breaking with decades-long bipartisan support and defying international law and multiple UN resolutions would make Australia an international pariah on this important foreign-policy issue," Mr Abdulhadi said.
"It would also erode Australia's claims that it is genuinely committed to the rules-based international order, making any future rebukes of countries that breach or show contempt for it wholly hypocritical."
Mr Morrison's announcement followed talks with the Liberal Party's candidate for this weekend's Wentworth by-election, former ambassador to Israel Dave Sharma.
"When people say sensible things, I think it's important to listen to them — and particularly when they have the experience of someone like Dave Sharma," Mr Morrison said this morning.
"We are committed to a two-state solution, but frankly it hasn't been going that well, not a lot of progress has been made.
"You don't keep doing the same thing and expect different results."
The Prime Minister said the timing of his announcement coincided with an imminent United Nations vote on the Palestinian Authority being recognised as the chair of the G77 group of developing nations, and Australia's decision to vote "no".
Mr Morrison denied he was discussing the matter because the Wentworth by-election was looming, and said he had not had any request to consider moving the embassy from the United States.
Nearly 13 per cent of voters in Wentworth are Jewish, and the Government needs to win the seat to retain its one-seat majority in the Lower House.
Middle Eastern embassies in Canberra have reacted with shock to Scott Morrison's announcement, with one representative of an embassy telling the ABC it would be a "disaster" for Australia's relationship with the region.
Ambassadors from Middle Eastern countries are planning to meet later today to discuss the announcement and work out a response.
Morrison's consideration in contrast to Turnbull's position
In June, then-treasurer Mr Morrison said there was no sense that the Liberal Party would support moving the Australian embassy.
Mr Morrison's consideration of a relocation is in contrast to the position of former prime minister Malcolm Turnbull, who said Mr Trump's decision to recognise Jerusalem as Israel's capital would not change Australia's dealings in the area.
Former foreign minister Julie Bishop was also opposed to the idea, despite strong support for a move from within the party's base.
Speaking to the ABC on Tuesday, Mr Sharma did not want to take credit for changing the Prime Minister's mind.
"I think he mentioned that he's discussed this with a number of people, myself included," he told RN Breakfast.
"I think the important point to note here is that this is very much within the context for support for a two-state solution.
"I strongly support the emergence of an independent, sovereign Palestinian state, living alongside Israel in peace."
Mr Sharma added that all of Israel's state institutions, including the Knesset, were already in Jerusalem and any suggestion that the city would not be part of the nation in any peace deal was wrong.
Israeli Prime Minister Benjamin Netanyahu was quick to thank Mr Morrison for considering the move, tweeting that he had spoken with his Australian counterpart.
Mr Morrison is not changing the Government's position on supporting a two-state solution to the Israeli-Palestinian conflict.
He has announced the strengthening of security ties with Israel by placing defence attaches in each others' embassies, and has ordered an inquiry into whether Australia should abandon support for the Iran nuclear deal, from which the US has withdrawn.
'The most erratic, reactionary and bullish US foreign policy'
However, Bishop George Browning, President of the Australia Palestine Advocacy Network, said in a statement the idea of moving Australia's embassy to Jerusalem would have no effect on the two-state solution was "ludicrous".
"Australia is aligning itself with the most erratic, reactionary and bullish US foreign policy ever. It is an irresponsible announcement that will put Palestinian human rights further back, for a handful of votes in Wentworth," Bishop Browning said.
"The two-state solution and the so-called peace process is not working. The reason for this is that Israel, supported by US policy, constantly undermines Palestinian hopes for autonomy by expanding settlements and entrenching the occupation.
"To move the embassy is to reward this behaviour and signal an end to any genuine bipartisan commitment."
In contrast, NSW Jewish Board of Deputies' chief executive, Vic Alhadeff, welcomed a potential move to Jerusalem.
"[Jerusalem] is where the seat of government is, it's where the Israeli parliament is, it's where the Supreme Court is; so the statement by the Prime Minister that he's going to consider moving the embassy reaffirms and recognises that Jerusalem always has been the capital of Israel, and it reaffirms the 3,000-year connection to Jerusalem and to Israel," Mr Alhadeff said.
He said it may also strengthen economic ties between Australia and Israel, and would not preclude East Jerusalem from becoming a future capital of Palestine.
A desperate bid to win votes, Wong says
Labor has previously said the US embassy move to Jerusalem was not helpful to the peace process in the region, and shadow foreign minister Penny Wong described the Prime Minister's comments as a desperate bid to win the Wentworth by-election.
"[Jerusalem's] status has to be resolved as part of any peace process discussion, as part of any discussion about a two-state solution," she said.
"And the fact that this has been a bipartisan position I think shows the lack of wisdom in Mr Morrison floating this."
At the 2016 Census, Jewish people made up about 12.5 per cent of the population of Wentworth, a seat made vacant by Mr Turnbull's resignation.
Palestinians want the capital of an independent Palestinian state to be in the city's eastern sector, which Israel captured in the 1967 Six-Day War and annexed in a move never recognised internationally.