Australia has decided to formally recognize west Jerusalem as Israels capital, but said Saturday that it wont move its embassy until theres a peace settlement between Israel and Palestinians. Prime Minister Scott Morrison said in a speech that Australia will recognize east Jerusalem as Palestines capital only after a settlement has been reached on a two-state solution. The Australian Embassy wont be moved from Tel Aviv until such a time, he said. While the embassy move is delayed, Morrison said his government will establish a defense and trade office in Jerusalem and will also start looking for an appropriate site for the embassy. Canberra became one of just a few governments around the world to follow US President Donald Trumps lead and recognize the contested city as Israels capital. Both Israel and the Palestinians claim Jerusalem as their capital. Most foreign nations avoided moving embassies there to prevent inflaming peace talks on the citys final status -- until Trump unilaterally moved the US embassy there earlier this year. Morrison first floated a shift in foreign policy in October, which angered Australias immediate neighbor Indonesia -- the worlds most populous Muslim nation - and Malaysia. Canberra on Friday told its citizens traveling to Indonesia to "exercise a high degree of caution", warning of protests in the capital Jakarta and popular holiday hotspots, including Bali. Morrison said it was in Australias interests to support "liberal democracy" in the Middle East, and took aim at the United Nations he said was a place Israel is "bullied". The opposition Labor party slammed Morrison for putting "self-interest ahead of the national interest". "Recognizing West Jerusalem as Israels capital, while continuing to locate Australias embassy in Tel Aviv, is nothing more than a face saving exercise," shadow minister for foreign affairs Penny Wong said in a statement. "This is a decision which is all risk and no gain," she said, adding it puts Australia "out of step" with the international community. Trumps decision to move the US embassy from Tel Aviv last May prompted tens of thousands of Palestinian protesters to approach the heavily-protected Israeli border. At least 62 Palestinians were killed by Israeli fire that day. Israeli Prime Minister Benjamin Netanyahu has previously hailed Morrisons initiative. The Palestinian government will press for Arab and Muslim states to "withdraw their ambassadors" and take some "meat and wheat" style "economic boycott measures" over Canberras decision, Palestinian ambassador to Australia Izzat Abdulhadi told AFP Friday. The Australia Palestine Advocacy Network (APAN) on Saturday said Morrisons move "serves no Australian interest". "This sabotages any real possibility for a future just agreement and further emboldens Israel to continue with its daily human rights violations of Palestinians," APAN president Bishop George Browning said in a statement.