Former prime minister Malcolm Turnbull has warned the Government relocating Australia's embassy in Israel would be met with "a very negative reaction" in Indonesia, following talks with the country's President.

Key points: This is Mr Turnbull's first public comment on the policy change

This is Mr Turnbull's first public comment on the policy change The former PM is in Indonesia to oversee a crucial free-trade deal

The former PM is in Indonesia to oversee a crucial free-trade deal There are fears moving the Israeli embassy could derail the deal

Mr Turnbull's successor, Scott Morrison, floated the idea of moving the embassy from Tel Aviv to Jerusalem a fortnight ago, in the lead-up to the Wentworth by-election.

Speaking on the sidelines of a conference in Bali, Mr Turnbull strongly indicated he was against the move and said Joko Widodo had directly raised his concerns with him.

"There's no question that were that move to occur, it would be met with a very negative reaction in Indonesia," Mr Turnbull said.

"This is after all the largest majority Muslim country in the world so we have to be very clear-eyed about that.

"We have to take into account Australia's national interest, and our interests in the region, when we consider decisions like this."

Commenting publicly on the issue for the first time, Mr Turnbull noted his government decided against moving Australia's embassy in Israel after "very careful and considered advice".

And he stressed to the President no decision had been taken by the Morrison Government.

"I passed on to President Jokowi his reassurance on that matter, that no decision has been taken and that he'll be taking on board the advice, reactions and feedback from our neighbours," he said.

Mr Turnbull says he has no reason to believe the crucial free-trade deal with Indonesia will not go ahead. ( AP: Firdia Lisnawati )

His visit to Indonesia comes at a crucial time, with the two countries due to formally sign off on a free-trade deal before the end of the year.

Mr Turnbull claimed it was his close friendship with Mr Widodo that laid the foundations for the deal, and said he had no reason to believe it wouldn't go ahead.

"I'm confident it will be signed in a couple of weeks, I've got no reason to believe it won't," he said.

"Of course it then has to be ratified through the Indonesian parliamentary system in the normal way."

Mr Morrison travelled to Jakarta in August, less than a week after taking over the top job, to announce the two countries had concluded negotiations on a deal, eight years in the making.

There were fears Mr Morrison's statement on Israel could derail the agreement, given Indonesia's strong support for a Palestinian state.