Israel closed its embassy in Asuncion in response.
Australia's prime minister said Tuesday that he was open to shifting the Australian Embassy from Tel Aviv to Jerusalem in line with President Donald Trump's decision to recognize the contested holy city as Israel's capital.
Australia may follow the United States' lead and relocate its embassy in Israel from Tel Aviv to Jerusalem, bucking decades of tradition.
Morrison also said no decision has been made on the issue, but added that "Australia should be open-minded to this and I am open-minded to this and our government is open-minded to this". "Any decision will be subject to a rigorous assessment of the potential impact of such a move on our broader national interests".
The decision has angered Arab states that have warned of damage to the peace process, with reports the biggest Islamic nation and our closest partner, Indonesia, is re-considering an imminent trade deal.
The AJA urges Australians not to be seduced by such cynical criticism of our Prime Minister and instead, to consider the merits of the proposal and to acknowledge that the initiative is sound and responsible.
The Palestinian mission has also slammed the announcement as "deeply disturbing".
"We're committed to a two state solution, but frankly, it hasn't been going that well".
Mr Morrison said Australia was strongly behind a two-state solution but the government wanted to challenge orthodox thinking and the "taboo" question of Israel's capital.
Mr Trump upended decades of convention by moving the USA embassy.
The two-state solution envisages an independent Palestine alongside Israel.
"This is an irresponsible policy that compromises the future of millions of people in the Middle East for a handful of votes in Wentworth", Browning said in a statement.
One important difference between Canberra's announcement and Russia's April 2017 recognition is the possible relocation of the embassy.
Prime Minister Scott Morrison said the idea was suggested to him by a former ambassador to Israel, Dave Sharma, who is a candidate for Morrison's conservative Liberal Party in a crucial by-election Saturday in a Sydney electorate with a large Jewish population.
Palestinians, with broad global backing, want East Jerusalem as the capital of a future state they hope to establish in the occupied West Bank and the Gaza Strip. "Can we transfer our representative office in Ramallah, which is not yet an embassy, to East Jerusalem?"
Whether Australia will end up recognizing Jerusalem - or West Jerusalem - is still open.
"This is of great importance to remind them that this does not go with worldwide law, with global relations... and puts Australia in contradiction to the rest of the world when it comes to Jerusalem and the status of Jerusalem", he said. "We talked about the size of trade between the Arab countries and Australia".
More importantly, the new Morrison government vows to review, "without prejudice", Australia's approach to the nuclear deal with Iran.
While not a signatory to the 2015 landmark nuclear pact with Iran, Australia reversing its current support of the deal, and possibly supporting the USA sanctions on Tehran, would greatly please Israel - probably even more than a recognition of West Jerusalem as its capital.
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