Exporters are worried the dispute over Mr Morrison’s decision on Israel has delayed a new trade deal with Indonesia, a big customer for wheat and beef whose two-way business with Australia is worth $16.5 billion a year. Indonesian president Joko Widodo raised the issue with Mr Morrison during talks in Singapore on Wednesday, reiterating the Indonesian argument against the embassy move. Prime Minister Scott Morrison speaks to journalists at the Singapore summit. Credit:AAP Mr Morrison emerged from the meeting to insist the embassy review and the trade deal were not linked in his talks with Mr Joko, although the Indonesian government issued a statement later that emphasised a two-state solution between Israel and Palestine. Asked whether his review of the policy on Israel would be done by Christmas, Mr Morrison said: “That’s our intention.”

Loading The Indonesian Trade Minister sharpened the dispute over the trade deal by saying the timing of the agreement was now linked to the decision on Israel. “It can be signed anytime, but when you will sign it... depends on Australia’s position” on the embassy, Mr Lukita told reporters on the sidelines of the East Asia Summit in Singapore. Indonesian Foreign Minister Retno Marsudi had stressed that “if Australia insists on moving its embassy to Jerusalem, the signing will be delayed,” Mr Lukita reportedly added. Fairfax Media has been told that an Australian minister advised Mr Lukita there is only a small chance of the embassy move going ahead, raising expectations in Jakarta that Mr Morrison will reconsider his stance.

Defence Industry Minister Steve Ciobo, who was trade minister before Mr Morrison became Prime Minister, met Mr Lukita in recent weeks at a defence event in Indonesia. Fairfax Media was told Mr Lukita said to Mr Ciobo: “Don’t ask when it will be signed.” Mr Ciobo replied: “Enggar, I know.” In one account of this conversation, Mr Ciobo is said to have told the Indonesian Trade Minister: “About the possibility, I cannot say 100 per cent we will move, but, I guess, the possibility is less than 5 per cent.” This account was disputed by some in the Australian government, who said Mr Ciobo did not speak for Mr Morrison.

Asked by email if Mr Ciobo had said there was a “less than 5 per cent” chance, a spokeswoman for Mr Ciobo said: “As a matter of principle, minister Ciobo doesn’t comment on his conversations with foreign ministers.” The sensitivities in Jakarta are acute because the Australian announcement on October 16 took the Indonesian government by surprise on the same day Palestinian Foreign Minister Riyad al-Maliki was visiting Jakarta. Mr Morrison has emphasised that he is only considering the options and has made no hard decisions, but the announcement sparked claims he was attempting to gain favour with Jewish voters in the week before the Wentworth byelection on October 20. "Whatever perspective you have on the issue, there is I think widespread frustration at what is occurring and the frustration about getting progress in this area. And we all want to see progress," Mr Morrison said of the path towards a two-state solution. In the world’s largest Muslim nation, with 225 million Muslims, the Australian position on Israel could become a domestic political issue in the Indonesian presidential elections in April if Mr Joko is seen as too supportive of the Australian relationship or the trade deal.

This concern was conveyed to the Australian government after former prime minister Malcolm Turnbull met Mr Joko in Bali late last month. Loading Fairfax Media has spoken to Coalition backbenchers who privately liken Mr Morrison’s decision to the “captain’s call” by former prime minister Tony Abbott to bestow a knighthood on Prince Philip. Several said they expected the government to extricate itself from the new position on Israel and return to the previous resolve to keep the embassy in Tel Aviv. National Farmers’ Federation chief executive Tony Mahar said rural exporters wanted the Indonesian trade agreement signed as soon as possible, but would not comment on the Israel policy question.

Former deputy prime minister Barnaby Joyce warned of a hit to trade from the government's Israel announcement. “I thought something like this might happen and it has,” Mr Joyce told Fairfax Media on Wednesday. “I am obviously very concerned about where this has led to but I don’t believe it’s something that can’t be negotiated through. “You have to be aware of the sensitivities and I’m sure the Prime Minister is in the very best position to allay any further concern that Indonesia may have.” Labor foreign affairs spokeswoman Penny Wong said Mr Morrison’s visit to Singapore had exposed the “utter debacle” of his decision to potentially end decades of bipartisan foreign policy to “try to win a few votes” in Wentworth.