Australia is considering officially recognising Jerusalem as the capital of Israeland moving its embassy to the holy city.

Prime minister Scott Morrison said he was “open-minded” to the idea but denied he had been influenced by last year's controversial decision by US president Donald Trump.

Mr Morrison said it was suggested to him by a former ambassador to Israel, Dave Sharma, who is a candidate for Morrison’s conservative Liberal Party in a crucial by-election this week.

“When sensible suggestions are put forward that are consistent with your policy positioning and in this case pursuing a two-state solution, Australia should be open-minded to this and I am open-minded to this and our government is open-minded to this,” Mr Morrison told reporters.

Israeli prime minister Benjamin Netanyahuconfirmed that Mr Morrison had informed him of the potential move and tweeted: “I’m very thankful to him for this. We will continue to strengthen ties between Israel and Australia.”

Mr Morrison’s announcement came 10 months after Mr Trump confirmed the US would recognise Jerusalem as the capital of Israel.

“I have made this decision without any reference to the United States. It has not come up in any discussion I have had with the president or with officials,” he told reporters.

“There has been no request, and there has been no discussion with the United States.

“Australia makes its decisions about its foreign policy independently. We do so in our own national interests consistent with our own beliefs and our own values.”

It prompted ambassadors from 13 Arab countries to meet in Canberra to discuss the implications of the potential move.

Egypt’s ambassador said the group had agreed to send a letter to the Australian foreign minister to express their “worries and concern”.

“Any decision like that might damage the peace process,” said Mohamed Khairat. “This will have very negative implications on the relations between Australia and not only Arab countries but many other (Islamic countries) as well.”

Mr Morrison also announced that Australia would vote against a United Nations resolution this week to recognise the Palestinian Authority as the chair of the Group of 77 developing countries.

However he confirmed Australia remained committed to finding a two-state solution to Israel’s conflict with the Palestinians.

The Australian opposition centre-left Labor Party said the Jerusalem announcement was a desperate attempt to win the by-election for Mr Sharma in Wentworth, Sydney.

If Mr Sharma is not elected, the government will lose its single-seat majority in the House of Representatives.

“Foreign policy, and Australia’s national interest are far too important to be played with in this fashion,” said Penny Wong, the leader of the opposition in the senate.

“The people of Wentworth, and all Australians, deserve a leader who puts the national interest ahead of his self-interest, and governs in the best long-term interest of the nation.”

George Browning, president of the Australia Palestine Advocacy Network, accused the government of “aligning itself with the most erratic, reactionary and bullish US foreign policy ever.”

“This is an irresponsible policy that compromises the future of millions of people in the Middle East for a handful of votes in Wentworth,” Mr Browning said in a statement.

The new US embassy in Jerusalem was opened in May despite widespread protests by Palestinians about the decision.

Palestinian leader Mahmoud Abbas denounced Mr Trump’s policy as the “slap of the century”.