Victorian Liberal leader Matthew Guy backs US President Donald Trump in declaring Jerusalem the capital of Israel, in a move at odds with Foreign Minister Julie Bishop's stance.

Mr Trump has promised to move the US embassy from Tel Aviv to Jerusalem, despite a furious reaction from Palestinian and other Arab and Islamic groups.

As Premier Daniel Andrews opened the state's trade and investment office in Tel Aviv this week, Coalition MPs said it should have been located in Jerusalem.

But Australia's official policy, re-iterated by Ms Bishop on Thursday, is to wait for the status of Jerusalem to be resolved through two-state solution negotiations between Israelis and Palestinians.