SYDNEY -- Australia recognizes West Jerusalem as the capital of Israel, but it will not move its embassy there from Tel Aviv until Jerusalem's final status is settled, Prime Minister Scott Morrison said Saturday.
Morrison announced the policy shift in a speech at the Sydney Institute here, noting that Israel's parliament and many government institutions are based in West Jerusalem. Canberra will set up a defense and trade office in the city and look for a potential embassy site, he said.
The decision has already been condemned by the Arab League. After Morrison indicated in October that he was open to moving the Australian Embassy to West Jerusalem, Muslim-majority neighbor Indonesia threatened to postpone a trade deal with Australia if it did so.
Morrison said Saturday that he supports a two-state solution with East Jerusalem as the capital of a future Palestinian state.
Israel calls Jerusalem its capital, but the majority of the international community does not recognize it as such. U.S. President Donald Trump in December 2017 recognized the city as the Israeli capital and moved the embassy there in May 2018.