(Transcript from World News Radio)
It's a change of position that puts Australia at odds with the United Nations and the International Court of Justice.
The federal Attorney General George Brandis says the government will no longer refer to East Jerusalem as occupied territory.
Senator Brandis says that description has pejorative implications which are neither helpful nor useful.
But as Sacha Payne reports, the change in Australia's position has shocked Palestinian representatives.
(Click on the audio tab above to hear the full report)
East Jerusalem has been under Israeli control since the 1967 war, when Israel also captured the West Bank and other territories from its Arab neighbours.
For decades, successive Australian governments have referred to East Jerusalem and the Palestinian territories as 'occupied'.
But now the Attorney General George Brandis has told a Senate Estimates committee hearing that's no longer the government's position.
"The use of the word occupied is not something that the Australian government of either political persuasion acknowledges or accepts. (Senator Lee Rhiannon) So, you don't use the term occupied Palestinian territories even though it's a United Nations term used widely by a number of international agencies. (Brandis) Well it's used by a lot of people, it's used by a lot of Communists too, weren't you a member of the Communist party once?"
That was one of the responses George Brandis provided to Greens Senator Lee Rhiannon who ask several questions where she made reference to "occupied East Jerusalem."
Independent Senator Nick Xenophon tried to get clarity on whether Australia regards the Israeli settlements in the West Bank as illegal.
"Well Attorney do you acknowledge the reality of the International Court of Justice Israeli war advisory on July the 9th 2004 which I understand was unanimous which said that the settlements were illegal? (Brandis) Well I'm aware that the International Court of Justice made a determination in relation to some of the settlements. I'm also aware that there are some public and international lawyers who have a contrary view."
The hearing comes after the Foreign Minister Julie Bishop questioned the use of the term 'illegal' to describe the Israeli settlements in the West Bank.
In an interview with the Times of Israel, she said she'd like to see which international law had declared them illegal.
Former Foreign Minister Bob Carr has told the ABC the Australian government has taken an extreme position which is outside mainstream opinion in Israel.
"And that means we are encouraging, we are encouraging the hardliners in Israel to think in terms of a greater Israel that is an Israeli annexation of what has been seen by the world up til now as territory occupied as a consequence of the 1967 war."
Izzat Abdulhadi is head of the General Delegation of Palestine to Australia.
He says the Australian government's position will NOT help efforts to achieve a Middle East peace based on a two state solution.
"We have deep concern about such a statement. I dont think it is really useful. I was shocked and also Arab and Islamic ambassadors were shocked because I just finished a meeting with all Arab ambassadors and they expressed their own deep concern and shock also of such a statement which is totally unecessary and totally inappropriate."
Dr Colin Rubenstein is executive director of the Australia/Israel and Jewish Affairs Council.
He's supportive of the Australian government move.
"I think this is a helpful and constructive move that shows Australia is serious and thoughtful and committed to constructive negotiations which will hopefully serve the interests of the palestinian people as well as maintain the security of israel."
Opposition Leader Bill Shorten has avoided saying what he thinks of the change, only criticising the way the way it was made.
"I am not comfortable with the process this government is adopting and I'm not going to get caught up into second guessing the outcomes when I'm not convinced that their process has been the correct process."
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