Malaysian Prime Minister Mahathir Mohamad also sent a warning on the issue at a summit in Singapore on Thursday, saying the Australian decision could increase the risk of terrorism. “I pointed out that in dealing with terrorism, one has to know the causes,” Dr Mahathir told journalists after emerging from a bilateral meeting with the Australian Prime Minister. “Adding to the causes of terrorism is not going to be helpful, I pointed that out. And Australia has not made any decision, they are looking into it.” Loading Replay Replay video Play video Play video Mr Morrison now faces growing objections from key Australian neighbours at a time when he seeks a $16.5 billion trade agreement with Indonesia and relies on Jakarta's cooperation to turn back asylum seeker arrivals.

Indonesian president Joko Widodo raised the embassy issue with Mr Morrison during talks in Singapore on Wednesday, reiterating the Indonesian argument against the move. Indonesian ministers have indicated the trade deal will not be signed until the Morrison government settles the question of its Middle East policy, in a process that is meant to conclude by the end of the year. Loading The Australian position threatens to become a domestic political issue in Indonesia ahead of its presidential election in April, putting Mr Joko under pressure to take a hard line on the matter when he is being challenged by Mr Prabowo, the former head of the country’s notorious Kopassus special forces. Ms Dian, a member of Mr Prabowo’s campaign team, said the party’s concern on the question was for Australia and its citizens who come to Indonesia.

“If Australia goes ahead with its plan of moving its embassy to Tel Aviv, a negative reaction toward Australia will happen here,” she said, in comments that express the view of the main opposition party. “Australia’s consideration on moving its embassy will affect Indonesian people at grassroots, the people who are low in literacy. “Some of them are the radicals. They may target any western people, they may think he or she is Australian just because they look western. “So I think we need to guard this issue together.” Ms Dian also said the trade deal with Australia was raising concerns with Mr Prabowo’s party because some of the changes could increase Australian ownership of Indonesian companies.

Indonesia had 1.2 million visits from Australian travellers last year. The Bali bombing in 2002 killed 88 Australians, 38 Indonesians and 76 people from other countries. An Australian source said Mr Morrison and Dr Mahathir had a general discussion about terrorism in their meeting but this did not include the question of whether Australia would move its embassy in Israel from Tel Aviv to Jerusalem. Malaysian Prime Minister Mahathir Mohamad shakes hands with Prime Minister Scott Morrison during Thursday's bilateral meeting. Credit:EPA As the meeting ended, however, Dr Mahathir said the issue of Palestine was a contributing factor to terrorism, but he did not say Australia was contributing to that problem, the Australian source added. Dr Mahathir raised concern about recognising Jerusalem as Israel's capital, but this was met by an assurance from Mr Morrison that no decision had been made and that an internal process was underway to decide the matter.