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Prime Minister Scott Morrison has flagged moving Israeli embassy to Jerusalem
He voiced idea during Wentworth by-election campaign to win Jewish voters
Indonesia is reportedly upset with the idea as it pushes pro-Palestinian agenda

By Stephen Johnson For Daily Mail Australia

Published: 02:05 EDT, 16 October 2018 | Updated: 03:23 EDT, 16 October 2018

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Indonesia could cancel an $11billion trade deal with Australia after Prime Minister Scott Morrison flagged moving the Israeli embassy to Jerusalem in the heat of the Wentworth by-election campaign.

Mr Morrison's proposal to copy U.S. President Donald Trump's relocation of the American embassy from Tel Aviv to the holy city has reportedly angered Australia's Muslim neighbour.

Indonesia, the world's largest Muslim-majority nation, has taken a strong stance in favour of Palestinian statehood and is considering suspending an imminent free trade deal reached with Australia only seven weeks ago, in light of the Jerusalem proposal, the ABC reported.

Indonesia (President Joko Widodo pictured) could cancel an $11billion trade deal with Australia after Prime Minister Scott Morrison flagged moving the Israeli embassy to Jerusalem

Mr Morrison's proposal to copy U.S. President Donald Trump's relocation of the American embassy to Jerusalem (pictured) has reportedly angered Australia's Muslim neighbour

Australia exported $7billion worth of goods to Indonesia in 2017, Department of Foreign Affairs and Trade data showed, and the cancellation of a free trade deal could jeopardise an $11.2billion trade relationship.

Mr Morrison made the proposal to relocate Australia's Israeli embassy from Tel Aviv to Jerusalem as he campaigned ahead of this Saturday's Wentworth by-election, in a Sydney eastern suburbs seat where 12.5 per cent of its residents are Jewish.

The Prime Minister told Parliament he had contacted Indonesian President Joko Widodo, who himself faces a tough re-election fight in April 2019.

'I have been in direct contact with President Joko Widodo over the course of last night and through this morning,' Mr Morrison told the House of Representatives on Tuesday.

Australia exported $7billion worth of goods to Indonesia in 2017 and the cancellation of a free trade deal could jeopardise an $11.2billion trade relationship (live sheep to Indonesia pictured)

PM Scott Morrison (pictured) flagged moving Australia's Israeli embassy from Tel Aviv as he campaigned ahead of this Saturday's Wentworth by-election in a heavily Jewish seat

'I have been pleased to be able to explain very clearly the nature of the announcements that I have made today.

'And I have been very pleased with the response that I have received from President Joko Widodo.'

Mr Widodo, a moderate Muslim, is already under political pressure from fundamentalist Islamic voters, after his former running mate as Jakarta governor, Basuki 'Ahok' Tjahaja Purnama, was targeted for being a Christian.

Mr Widodo (left with Scott Morrison) is already under political pressure after his former running mate as Jakarta governor, Basuki 'Ahok' Tjahaja Purnama, was targeted as a Christian

In August, the Indonesian President picked hardline Muslim cleric Ma'ruf Amin as his running mate for next year's presidential elections.

During that same month, Australia and Indonesia signed a Comprehensive Economic Partnership Agreement, that will allow 99 per cent of Australia's exports to be sold in Indonesia duty free.

The free trade deal with Indonesia was set to unlock education opportunities in the Asian country, which has a workforce of more than 130 million people but half of them only have a primary school education.