The Ministry said it was surprised from the contradictory logic presented in the Australian Prime Minister's speech, which "emphasizes adherence to the two-state solution and the encouragement of the parties to continue dialogue and negotiations towards a peace agreement, while at the same time considering recognizing Jerusalem as the capital of Israel".
Foreign Minister Retno Marsudi, speaking at a joint news conference with Palestinian Foreign Minister Riyad al-Maliki in Jakarta, reaffirmed Indonesia's support for a two-state solution to the Middle East dispute and warned Australia against the risk of insecurity.
Australia's reputation with Arab nations who are opposed to Israel may also be affected by Mr Morrison's suggestion to move the Australian embassy to Jerusalem, tacitly endorsing the city as Israel's capital.
The Palestinian representative to Australia, Izzat Salah Abudulhadi, slammed the decision, calling Morrison's plan "deeply disturbing" and saying it would embolden the Trump administration to resolve the Israel-Palestinian conflict in a way that leaves the status of Jerusalem and Palestinian refugees "off the table", the Guardian reported.
Australia is considering following President Donald Trump's lead in moving the nation's embassy in Israel to Jerusalem. Later, the head of the Australian government stated that the issue will be resolved before the end of this year.
Indonesia, the world's biggest Muslim-majority country and a major buyer of wheat and beef, bought more than A$3 billion of Australian agricultural commodities in 2017, according to government data.
"We will continue to work closely and cooperatively with our allies and our partners all around the world on these issue", Morrison told parliament.
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Netanyahu has attempted to persuade other countries to move their embassies to Jerusalem.
Mr Morrison says that he, like his predecessor, has been pressured by the Jewish lobby from the early days of his ascension in August to follow Mr Trump in recognising Israel's claim on Jerusalem, and to review Australia's backing of the Iran nuclear deal - a request to which he has also acceded. "We have a lot of students coming from the Gulf states and other countries, we have a large community", Abdulhadi said.
"Scott Morrison is now so desperate to hang on to his job, he is prepared to say anything if he thinks it will win him a few more votes - even at the cost of Australia's national interest", said the opposition Labour party foreign policy spokeswoman Penny Wong.
It is predictable that the Prime Minister will be unjustly criticised for developing foreign policy to satisfy the voters of Wentworth for this week's by-election.
"I have made this decision without any reference to the United States", he said.
One future scenario could involve Australia recognising a Palestinian Authority capital in East Jerusalem and Israeli capital in West Jerusalem.
Israel's victory in the Six-Day War gave it control of Arab East Jerusalem, including the Old City.
Asked if this announcement was politically convenient in the lead-up to the Wentworth by-election, Mr Morrison said it was timed to coincide with the United Nations vote on Tuesday night.