Jerusalem embassy move 'could scupper billion-dollar Australia-Indonesia trade deal'

A former Australian prime minister has warned the government to expect a negative reaction from Indonesia if Australia follows the United States by shifting its embassy in Israel from Tel Aviv to Jerusalem.

Former Prime Minister Malcolm Turnbull spoke to reporters after meeting Indonesian President Joko "Jokowi" Widodo on the tourist island of Bali on Monday to discuss a bilateral free trade deal.

"The president expressed to me ... the very serious concern held in Indonesia about the prospect of the Australian Embassy in Israel being moved from Tel Aviv to Jerusalem," Turnbull told Australian Broadcasting Corp. in an interview aired on Tuesday. "There's no question that were that move to occur, it would be met with a very negative reaction in Indonesia."

"This is after all the largest ... majority-Muslim country in the world, so we have to be very clear-eyed about that and we have to take into account Australia's national interest and our interests in the region when we ... consider decisions like this," he added.

Prime Minister Scott Morrison said on Tuesday no decision had been made yet on the embassy's location.

Morrison sent his predecessor to represent Australia at a climate change conference in Bali because of Turnbull's close personal rapport with the Indonesian leader, who had been disappointed that Turnbull's government colleagues replaced him in August in response to poor opinion polling.

Turnbull said he was confident that the free trade deal between Australia, a nation of 25 million people, and Indonesia, a near-neighbour with a population of more than 260 million people, would be signed within weeks.

Turnbull also said Australia should stick with a policy of more than 40 years that its embassy should be in Tel Aviv.

Morrison, a long-time ally of Turnbull who had argued against replacing him in a leadership ballot of government lawmakers, floated the idea of shifting the embassy days before a by-election in a Sydney electorate with a large Jewish population.

The government lost the by-election, forced by Turnbull's resignation from Parliament, and its single-seat majority in the House of Representatives.

"Australia will always make our decisions on our foreign policy based on our interests and we'll do that as a sovereign nation," Morrison told reporters.

"We'll consult, we'll listen to others, but at the end of the day ... I will always put our interests first," he added.

The Trump administration turned its back on decades of US policy last December by recognising Jerusalem as Israel's capital and in May, moved the US Embassy from Tel Aviv.

The decision sparked worldwide anger and was a setback for Palestinian aspirations for statehood. Palestinians see east Jerusalem, captured by Israel in the 1967 Mideast war, as the capital of a future independent state.

Morrison said Australia remained committed to finding a two-state solution.

When Morrison became prime minister, he made his first overseas trip to Indonesia, an ardent supporter of the Palestinian cause, in a sign of the importance Australia places on the bilateral relationship.

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