Scott Morrison
Scott MorrisonReuters

Australia's Prime Minister Scott Morrison on Sunday stood by his decision to recognize western Jerusalem as the capital of Israel, despite criticism from neighboring Muslim countries.

Australia's Muslim-majority neighbor Malaysia said Sunday it "strongly opposes" the decision to recognize western Jerusalem.

The announcement was "premature and a humiliation to the Palestinians and their struggle for the right to self-determination," the government said in a statement advocating a "two-state solution."

Australia's immediate neighbor Indonesia, the world's most populous Muslim nation, was angered by the embassy move proposal in the run-up to the Australian by-election, and said Saturday it "notes" the decision.

Citing Jakarta's response, Morrison said Sunday that the international reaction had been "measured" and that his decision would progress a two-state solution.

"I think the responses that we have seen from countries so far has been measured," Morrison told reporters in Canberra.

"Australia would continue to respect a two-state outcome that remained our goal as strongly as ever."

Israel's embassy in Canberra on Sunday said the decision was a "step in the right direction."

Morrison announced on Saturday that his country officially recognizes western Jerusalem as the capital of Israel, though he stressed that the Australian embassy would not move to western Jerusalem until a peace agreement was reached between Israel and the Palestinian Authority.

Morrison did say, however, that his government would establish an office in Jerusalem that would deal with security and trade.