Prime Minister Scott Morrison has confirmed he is considering following Donald Trump's lead by moving Australia's embassy in Israel from Tel Aviv to Jerusalem, days out from the Wentworth by-election.
Mr Morrison has also announced a review into support for the Iran nuclear deal and declared Australia will this week vote against the Palestinian Authority chairing a United Nations group.
The major shifts in Middle East foreign policy come five days out from a crucial by-election in the Sydney seat of Wentworth, where 12.5 per cent of voters are Jewish.
The prime minister dismissed questions about the timing of his announcement.
But he has credited the Liberal Party's Wentworth candidate Dave Sharma, a former Australian ambassador to Israel, with raising the embassy issue.
"Australia's position on this issue has, to date, assumed that it is not possible to consider the question of the recognition of Israel's capital in Jerusalem and that be consistent with pursuing a two-state solution," he said.
"You can achieve both and indeed by pursuing both you are actually aiding the cause for a two-state solution."
Mr Morrison insisted the coalition government remained committed to pursuing a two-state solution between Israel and Palestine.
"But frankly, it hasn't been going that well. Not a lot of progress has been made, and you don't keep doing the same thing and expect different results," he told reporters in Canberra.
Opposition foreign affairs spokeswoman Penny Wong said the prime minister was playing "dangerous and deceitful" word games ahead of the Wentworth poll.
"This is a bloke who is prepared to do and say anything to hold on to his parliamentary majority," Senator Wong told reporters.
Israeli Prime Minister Benjamin Netanyahu has publicly praised Mr Morrison on the Jerusalem issue.
If Australia does proceed, it will be following the US which earlier this year moved its embassy, effectively recognising the holy city of Jerusalem as the 'true' capital of Israel.
It would also be a major departure from the position taken by former prime minister Mr Turnbull and former foreign minister Julie Bishop.
Speaking to ABC radio, Mr Sharma pointed out he first made comments around moving the embassy in May and said the way the US moved its embassy was not consultative.
Mr Sharma said he would have preferred the US stick with the Iran deal but it made sense for Australia to review its position in light of the withdrawal.
Labor and the coalition - along with the United Kingdom, France, Germany - have until now backed the Iran nuclear weapons deal.
In March, Ms Bishop criticised the US for pulling out and recommitted Australia to support the deal, under which Iran agreed to slow its nuclear research and development program and allow weapons inspections in exchange for the removal of international sanctions.
Australian Associated Press