Australia’s relationship with Palestinians and the Arab world will be damaged by its decision to vote against a United Nations resolution that demanded the end of Israeli occupation within three years, the chief Palestinian representative in Canberra has warned.

Australia was one of only two nations, along with the United States, Israel’s closest ally, to vote against the resolution.

Five other nations, including Britain, abstained from the vote, meaning that just eight of the 15 UN security council nations voted in favour of the resolution – one vote short of nine necessary for passage.

Izzat Abdulhadi, head of the general delegation of Palestine to Australia and New Zealand, said he was surprised at Australia’s vote as he expected it would “at least” abstain.

“It was very disappointing and regrettable ... and will unfortunately affect relations with Palestine and the Arab world,” Abdulhadi told Guardian Australia.

“It’s really very disappointing and I can’t understand why the decision was taken. We don’t know what the reasons are for this.”

Abdulhadi claimed there had been a shift in Australia’s position on the long-running conflict, citing what he viewed as a new Australian stance on East Jerusalem.

In June George Brandis, Australia’s attorney general, said it wasn’t appropriate to refer to East Jerusalem as occupied as it was a pejorative term.

“There is a policy shift in Australia’s voting position, as represented with the East Jerusalem issue,” Abdulhadi said. “I hope there will be a discussion with Australia on the issue and an opportunity for engagement with the foreign minister.”

He added that Palestinians would continue the process of getting international support, despite the “bad advice from US and Australia to wait before continuing the process”.

Even if the required nine UN votes were achieved, the US would have been able to use its veto power as a permanent member of the security council. China, Russia, Britain and France are the other veto-wielding permanent members, with Australia among the 10 non-permanent members.

The Palestinian resolution set out a year-long process for a “just, lasting and comprehensive peaceful solution” to the Israeli-Palestinian conflict, which it stipulated should include a “sovereign and viable” Palestinian state based on 1967 borders. All Israeli forces would withdraw from the occupied territory by 2017, under the resolution.

Gary Quinlan, Australia’s ambassador to the UN, said Australia was committed to a future where Israel and Palestine exist peacefully in side-by-side states.

“Regrettably, the draft resolution under consideration today will not help this process and that is why we have voted against it,” he said.

“It lacks balance and seeks to impose a solution put forward by one party alone. Final status issues can only be resolved between the two sides. A process agreed by both sides is the only way forward to reach an enduring agreement.

“The violence experienced in recent months in the Palestinian territories and Israel underlines the terrible human costs of the failure of final status negotiations and how fragile the situation is in the absence of genuine progress towards establishing a Palestinian state – an objective in which Australia believes and to which we are committed.”

Britain said while it supported much of the resolution’s content, it had to abstain because normal negotiation processes didn’t take place. Russia and China both supported the resolution.

Liu Jieyi, China’s permanent representative to the United Nations, said: “This draft reflects just demands of Arab states, including the Palestinian people, and is in accord with the relevant UN resolutions, the ‘land for peace’ principle, the Arab peace initiative and Middle Eastern peace roadmap.

“We express deep regret over the failure of the draft resolution to be adopted.”

Australia joined the security council last year. Its two-year term ends as 2014 draws to a close.

Australia has used its security council membership to pressure Russia over the shooting down of flight MH17 over eastern Ukraine, in which 38 Australians died. The foreign minister, Julie Bishop, has also addressed the security council on the threat posed by Islamic State.

The Israeli embassy in Canberra said: “We are glad that the UNSC understood that accepting the proposed resolution would do nothing but harm chances for peace and undermine hopes for a better future for Palestinians and Israelis alike. We commend the Australian government for its level-headed vote, which characterised Australia’s time at the UNSC ending today, and call for the Palestinian Authority to return to the negotiation table.”