News: Israel signals displeasure at Australia's "mistaken" W.Jerusalem move

• Israel sees all of Jerusalem as its capital
• Palestinians want E.Jerusalem for future state

Israel signalled displeasure on Sunday with Australia's recognition of West Jerusalem as its capital, with a confidant of Prime Minister Benjamin Netanyahu saying it was a mistake to gainsay Israeli control over the whole city.

The premier, for his part, stayed silent on Canberra's move at a weekly Israeli cabinet meeting that is usually his opportunity to hold forth in public on major diplomatic developments.

Israel captured Arab East Jerusalem in a 1967 war and annexed it as its capital in a moved not recognised internationally. Palestinians want East Jerusalem as capital of the state they hope to found in the occupied West Bank and the Gaza Strip.

A year ago, U.S. President Donald Trump outraged Palestinians by recognising Jerusalem as the Israeli capital, a designation that did not acknowledge their claim on the east of the city though it left open the question of its final borders.

On Saturday, Australian Prime Minister Scott Morrison said Canberra formally recognises West Jerusalem as Israel's capital but reaffirmed his country's support for a Palestinian capital in East Jerusalem under a two-state peace deal.

Israel's Foreign Ministry responded tepidly, calling the Australian move "a step in the right direction". At the cabinet meeting on Sunday, Netanyahu declined to elaborate.

"We issued a statement at the Foreign Ministry. I have nothing to add to it," he told reporters at the outset of the meeting.

Tzachi Hanegbi, Israel's minister for regional cooperation and a Netanyahu confidant in the right-wing Likud party, was more openly critical of Australia, though he deemed it a "deep and intimate friend of many years' standing".

"To our regret, within this positive news they made a mistake," Hanegbi told reporters outside the cabinet room.

"There is no division between the east of the city and west of the city. Jerusalem is one whole, united. Israel's control over it is eternal. Our sovereignty will not be partitioned nor undermined. And we hope Australia will soon find the way to fix the mistake it made."

Morrison's move first surfaced in October, when it was viewed cynically in Australia because it came days before a crucial by-election in an electorate a strong Jewish representation. His party lost that poll.

Palestinian chief negotiator Saeb Erekat said Saturday's move was born of Australian "petty domestic politics".

"All of Jerusalem remains a final-status issue for negotiations, while East Jerusalem, under international law, is an integral part of the occupied Palestinian territory," he said.