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The United States moved their embassy to Jerusalem in May
Australia will consider recognizing Jerusalem as the capital of Israel and relocate its Tel Aviv embassy, Premier Scott Morrison said.
If this action were taken, this decision would follow a recent policy change in the United States, which has been criticized internationally.
Morrison said Australia remains committed to a solution to the two-state Israeli-Palestinian conflict.
Political opponents said Morrison's comments were a "misleading" ploy for votes before a crucial by-election.
The status of Jerusalem is one of the most controversial issues between Israel and the Palestinians.
US President Donald Trump sparked international criticism last year when he overturned decades of US foreign policy by recognizing the ancient city as the capital of Israel. The US Embassy was transferred from Tel Aviv to Jerusalem in May.
- Why Trump and Jerusalem were not about peace
Mr Morrison said that he would consult his cabinet and other countries before making any decision.
"We are committed to a two-state solution, but frankly, that did not go well – little progress has been made," he told reporters on Tuesday.
He added that it might be possible for his country to support a two-state solution and to recognize Jerusalem as the capital of Israel – which Australia had "assumed until the end of the century. now "was unachievable.
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The prime minister said that a future scenario could involve Australia to recognize a Palestinian Authority capital in East Jerusalem and an Israeli capital in West Jerusalem.
"Australia should be open to that," Morrison said.
Israeli Prime Minister Benjamin Netanyahu tweeted his approval on Monday.
Morrison's predecessor, Malcolm Turnbull, had ruled out the United States moving the Australian Embassy to Jerusalem.
Outcome of the by-election
On Tuesday, Morrison said his thoughts had been guided by Australia's former ambassador to Israel, Dave Sharma.
Mr. Sharma is the government's candidate for a by-election, which will take place on Saturday, at the post left vacant by Mr. Turnbull following his ouster of the post of prime minister.
If Mr. Morrison fails to retain the Sydney electorate, Wentworth, he will be forced to the minority government. He denied that his comments Tuesday were aimed at the large Jewish community of Wentworth.
Penny Wong, leader of the Labor Opposition Senate, said that Mr. Morrison was playing "dangerous and misleading word games with Australia's foreign policy".
"[Scott Morrison] is ready to say anything if he thinks it will bring him some extra votes, even to the detriment of Australia's national interest, "she said.
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