But a closer look at the joint statement Morrison and his foreign minister, Marise Payne, issued on Tuesday shows that Australia's potential recognition of Jerusalem as Israel's capital, if it will actually happen, would extend only to the western part of the city, and would include the recognition of its eastern part as the capital of a future Palestinian state.
Morrison called a press conference to say he was "open-minded" to proposals to formally recognise Jerusalem as the capital of Israel and move his nation's embassy to the holy city, a sharp break with the policy of successive Australian governments for decades. "Prime Minister Netanyahu thanked him", a statement from the Netanyahu's office said.
"We are committed to a two-state solution, but frankly, it hasn't been going that well - not a lot of progress has been made", he told reporters on Tuesday.
Prime Minister Scott Morrison said on Tuesday that he is open to relocating the Australian embassy in Israel from Tel Aviv to Jerusalem.
And 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.
Morrison told reporters that he would make an announcement on Tuesday regarding Jerusalem al-Quds and Australia's "No" vote for a United Nations resolution allowing Palestine to chair the Group of 77.
The two leaders also discussed strengthening bilateral relations, deepening defense ties and a prospective agreement to appoint military attaches to both embassies.
"I think we have to challenge that", Morrison said earlier in Canberra.
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Morrison came to power in August after a revolt by hardline conservatives in the Liberal party ousted his more moderate predecessor, Malcolm Turnbull. 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.
This claim has prompted debates in Australia and overseas, as the status of Jerusalem has been one of the key stumbling stones for negotiating a Palestinian-Israeli peace deal.
Egypt's ambassador to Australia Mohamed Khairat said ambassadors from 13 Arab countries had met in Canberra and agreed to send a letter to Australia's foreign minister expressing their concern.
In September after a "re-examination", Paraguay flipped on its former President Horacio Cartes' decision to move its embassy to Jerusalem deeming it "unjustified" sparking swift diplomatic retaliation by Israel.
Furthermore, the Palestinians are already protesting, arguing that a unilateral recognition of Jerusalem "would make Australia an worldwide pariah on this important foreign-policy issue" and threatening that it would hurt the country's relations with Arab and Muslim-majority countries.
Morrison denied that the United States or the byelection had influenced his announcement.
"I am open to further pursuing (moving the embassy) and doing that together with Cabinet colleagues", The Daily Telegraph quoted Morrison as saying.
"Indonesia is very, very important for us", said Mr Netanyahu at the International Christian Media Summit in Jerusalem, adding: "Indonesia is over 200 million people".