Australia could still support a two-state solution and recognise Jerusalem as Israel's capital - something that Australia had "to date assumed" was unfeasible, Mr. Morrison said.
Labor is concerned the approach could undermine the prospect of a two-state solution between Israel and Palestine. The Liberal candidate contesting the by-election on Saturday, Dave Sharma, is a former Australian ambassador to Israel who has floated the idea in the past. Wentworth is home to a significant-sized Jewish community and a Sharma loss in the election means Morrison would lose his one-seat majority in Parliament, leading critics to accuse Morrison of playing politics with the country's foreign policy. "The other one hasn't been working that well", the newspaper reported.
Israeli Prime Minister Benjamin Netanyahu tweeted his approval on Monday. But Morrison's announcement was timed to coincide with a make-or-break moment for his fledgling premiership.
"We will continue to work closely and cooperatively with our allies and our partners all around the world on these issue", Morrison told parliament.
But Indonesia's Foreign Minister Retno Marsudi said the government questions the merits of Morrison's announcement and has conveyed its "strong concern".
When Morrison became prime minister in August, he made his first overseas trip to Indonesia, a near-neighbour that is the world's largest Muslim-majority nation and an ardent supporter of the Palestinian cause.
IEA sees world oil market 'adequately supplied'
The IEA report is the latest government assessment to predict weaker demand ahead and conclude that supply is adequate. The rapid increase in prices was more about perception of a supply shortage than real fundamentals, he said.
Trump's Jerusalem move marked the first time since the UN-brokered partition of Palestine in 1947 that a president of the USA - a member of the Middle East Quartet, which is charged with mediating the peace process between Palestine and Israel - has departed from the established policy that the issue of Jerusalem as Israel's capital should be kept off the table.
Such a move, which would follow U.S. President Donald Trump's controversial decision in December to do just that, would also reverse decades of foreign policy and inflame tension with some of Australia's Asian neighbors.
"I hope Australian government is not serious in this proposal to support unreasonable American decision to set up their embassy in Jerusalem".
A picture taken on 14 May 2018, shows a general view of the United States Embassy in Jerusalem. "The people of Wentworth, and all Australians, deserve a leader who puts the national interest ahead of his self-interest".
"I am open to further pursuing (moving the embassy) and doing that together with Cabinet colleagues", The Daily Telegraph quoted Morrison as saying.
US President Donald Trump drew worldwide criticism past year when he reversed decades of American foreign policy by recognising the ancient city as Israel's capital.