, the world's largest Muslim-majority country, on Tuesday warned Australia that moving its embassy to Jerusalem could undermine a peace process between Israel and the Palestinians.

Australian Prime Minister Scott Morrison said Tuesday that his country was "open" to shifting recognition of Israel's capital to Jerusalem while still being committed to a two-state solution.

Indonesian Foreign Minister Retno Marsudi said she had conveyed her country's opposition to such a move to Australia.

"Indonesia encourages Australia and other nations to continue to support the peace process and not conduct any action that could undermine the peace process and global security," she said after talks with visiting Palestinian Foreign Minister Riyad al-Maliki.

"Indonesia is concerned about [Morrison's] remarks and has questions about the motive for the statement," she said.

Indonesia will provide 7 million dollars in aid for the Palestinians, including 2 million dollars through the United Nations Relief and Works Agency for Palestinian Refugees (UNRWA), the Foreign Ministry said in a statement after the meeting with al-Maliki.

Next year, Indonesia will also provide training to 90 Palestinians in good governance, agriculture and empowerment of women as well as providing scholarships to Palestinian students who wish to study in Indonesia, it said.  

Indonesian Foreign Ministry spokesman Arrmanatha Nasir declined to comment on a report by Australian broadcaster ABC that Jakarta was considering putting a trade deal due to be signed soon with Australia on hold over Morrison's comments.

Morrison said no decision had been made to move Australia's embassy from Tel Aviv to Jerusalem, but he said arguments in favour of such a move were "persuasive."

He said there had been no discussion on the matter with the United States, which has already moved its embassy to Jerusalem.

Indonesia has also criticized the US embassy move and warned that it would threaten the peace process.  

Indonesia does not have diplomatic relations with Israel and is a strong supporter of the Palestinian quest for nationhood.