Prime Minister Scott Morrison has described as "friendly and respectful" his first face-to-face talk with Indonesian president Joko Widodo since floating the idea of shifting Australia's embassy in Israel to Jerusalem.
Indonesia, the world's most populous Muslim nation, is furious at the potential relocation of the embassy from Tel Aviv because it considers Jerusalem's status critical to a two-state solution between Israel and the Palestinians.
Mr Morrison's announcement prior to the Wentworth by-election has stalled an imminent free-trade agreement between the two nations.
The leaders were due to sign the pact on the sidelines of this week's ASEAN summit in Singapore, but finalising the agreement has been put on hold.
Mr Morrison, speaking in Singapore, says there is no animosity between the two countries: "It was, as always, a very friendly and respectful conversation. We have a longstanding relationship with Indonesia, and we have a comprehensive strategic partnership which goes well into the future. And that means that, as from time to time, issues arise, you're able to talk about them openly and honestly and in a friendly way."
Indonesian trade minister Enggartiasto Lukita has confirmed there will be no trade deal while Australia considers the possible embassy move.
Mr Morrison says his Government intends to decide on the embassy before Christmas. But despite Indonesian ministers saying the two issues are inextricably linked, Mr Morrison says he raised the issue of the embassy and the trade deal with President Widodo separately. "These issues were not related, in terms of Australia's position on the foreign-policy matter you've referred to (embassy move) and issues of our trade. These were not raised in connection. We discussed both of those issues."
Opposition foreign-affairs spokeswoman Penny Wong says the embassy controversy is harming Australia's economy. And she has told the Senate it is also damaging one of the nation's most important relationships: "The Prime Minister's visit to Singapore has now exposed in full the utter debacle created by Mr Morrison's desperate decision, desperate decision, to trash decades of considered, bipartisan foreign policy to try and win a few votes in Wentworth. To try and win a few votes in Wentworth! And didn't that go well?".
Liberal senator Eric Abetz says Australia should reconsider providing foreign aid to Indonesia if it continues to seek to dictate Australian foreign policy. But Mr Morrison says Australia has supported and always will support Indonesia. "We have always been there to support Indonesia's development and to be there for them in times of great crisis and distress. And that's our way. That's what we do. And Indonesia doing well economically, Indonesia doing well strategically, is good for Australia, and that's why we do it. We do it because it's good for our national interest to support Indonesia's advancement, and we've seen them come ahead in leaps and bounds."
Despite the tensions around the potential embassy move, Trade Minister Simon Birmingham says he is confident the free-trade deal will be signed before Indonesians go to the polls in April. "We are committed to working through and ensuring we get the agreement signed. Australia and Indonesia have successful partnerships across a range of areas. And my Indonesian counterpart and I have expressed again our commitment to work together, to get it signed and to get all the work done to ensure that can happen."
Australians are due to go to the polls by May, so, even if the deal is signed, it is unlikely to be ratified by parliament until after the federal election.
Story by Tara Cosoleto for SBS News.
