Indonesian president Joko Widodo raised the issue with Mr Morrison during talks in Singapore on Wednesday, reiterating the Indonesian argument against the embassy move.

The Malaysian comments are significant because the country's leaders had avoided any criticism of the policy decision last month to consider moving the Australian embassy in Israel from Tel Aviv to Jerusalem.

While Malaysia was part of a joint statememt with other Muslim nations that warned against a change in Australian stance on the embassy, it has so far avoided direct criticism.

The Australian announcement last month took the Indonesian government by surprise on the same day Palestinian Foreign Minister Riyad al-Maliki was visiting Jakarta.

Mr Morrison has emphasised that he is only considering the options and has made no hard decisions, but the announcement sparked claims he was attempting to gain favour with Jewish voters in the week before the Wentworth byelection on October 20.

"Whatever perspective you have on the issue, there is I think widespread frustration at what is occurring and the frustration about getting progress in this area. And we all want to see progress," Mr Morrison said of the path towards a two-state solution.

Dr Mahathir has had celebrated differences with Australian leaders in the past, including a clash with former Labor prime minister Paul Keating in 1993 when Mr Keating called the Malaysian leader a "recalcitrant" for not going to an Asia Pacific Economic Cooperation summit.

Dr Mahathir demanded an apology and Mr Keating later wrote to say his remarks were not calculated to give offence.

More to come

With AAP