Victoria has opened a business office in Tel Aviv but the opposition says it will move it to Jerusalem if it wins power.
Premier Daniel Andrews officially opened the trade and investment office in Tel Aviv on Thursday because "from a tech point of view, medical research, investment (and) commerce, Tel Aviv really is the capital", he told the Nine Network.
The office includes a biomedical research and exchange program to drive medical technology collaboration between between Victoria and Israel.
"This is a win-win for Victoria and Israel," Mr Andrews said in a statement.
"The new trade office will open doors for Israeli companies in Victoria - creating local jobs here at home - while at the same time promoting Victoria's best and brightest on the world stage."
But the coalition said the office should be in Jerusalem because it was the capital and to overlook it was disrespectful.
An office in Jerusalem would increase access to export markets, facilitate investment into the immediate region and promote business innovation and collaboration with Israel, the opposition said.
The office opening comes as Foreign Minister Julie Bishop confirmed Australia has no intention of moving its Tel Aviv embassy despite US President Donald Trump announcing his country would officially recognise Jerusalem as the capital of Israel.
Mr Trump's controversial move has been labelled a declaration of war by some Palestinian commentators.
