Former prime minister Kevin Rudd has called for a major shift in foreign policy, arguing that Australia should formally recognise the Palestinian state.

Key points: Kevin Rudd says Australia should "draw a line in the sand" and formally recognise Palestine

Kevin Rudd says Australia should "draw a line in the sand" and formally recognise Palestine Mr Rudd says he is a lifelong supporter of the state of Israel

Mr Rudd says he is a lifelong supporter of the state of Israel 137 states and territories have recognised Palestine, but the US, UK, France and NZ do not

"The time has come for Australia to join countries like Sweden and the Holy See in formally recognising the Palestinian state," he said in a statement to ABC Radio's PM program.

"It is time for Australia to draw a line in the sand on this matter. As 137 states already have."

Mr Rudd said he was concerned about the building of settlements in occupied Palestinian territory on the West Bank, saying it fundamentally undermines the prospect of a two-state solution.

He is also concerned about Donald Trump's ambiguous statement about a two-state solution this week, where the US President appeared to step away from the United States' long-held position.

"I'm looking at two-state [solution] and one-state and I like the one that both parties like. I'm very happy with the one that both parties like," Mr Trump said at a press conference earlier this week with Israeli Prime Minister Benjamin Netanyahu.

"I can live with either one."

Mr Rudd said he is proud to have been a lifelong supporter of the state of Israel and its right to exist behind secure boundaries.

But he said he deeply fears the possibility of a third Intifada, and that "we are drifting towards the disintegration and death of an independent Palestinian state".

"It is now critical for Israel's closest friends and allies to send a clarion clear message to both Tel Aviv and Washington that the abandonment of a two-state solution is unacceptable," he said.

"Australia is one such close friend and ally. It is not acceptable, therefore, for Australia to use weasel words."

His comments come ahead of Mr Netanyahu's visit to Australia next week, and follow similar calls from another former prime minister Bob Hawke and former foreign ministers Gareth Evans and Bob Carr.

While there are 137 countries that recognise a Palestinian state, major developed countries such as the UK, the US, France, Germany, Canada and New Zealand do not.

The two-state solution

Currently there is a bi-partisan policy by both Labor and the Coalition to support the two-state solution.

However, the Labor Party's official position is that if the next round of peace negotiations between the Palestinians and the Israelis fail then the party should consider whether it should recognise a Palestinian state.

Federal Labor MP Maria Vamvakinou, who is the co-convenor of the Parliamentary friends of Palestine, said the statement by Mr Rudd is significant and adds to the weight of opinion within the party that Labor should recognise Palestine.

"This intervention follows on from statements by another former prime minister Bob Hawke who is himself a very strong friend of Israel throughout his career, and two former foreign ministers Bob Carr and Gareth Evans," she said.

"All those people, I think if anyone understands the complexity of geopolitics it is these former Labor prime ministers and foreign ministers.

"A line must be drawn in the sand, I agree with Kevin, and I'm sure a large number of the Australian community do also."

She said the comments from Mr Rudd may encourage other people in Labor Party to push for Palestine recognition.

"It means that we're looking at a possible new paradigm in the way that we advocate on this issue, and I think it will embolden and will assist perhaps others in the Labor movement to begin making similar calls," she said.

Rudd's comments 'ill-timed and unhelpful'

But Dr Colin Rubenstein, the executive director of the Australia/Israel and Jewish Affairs Council, said the comments from Mr Rudd were ill-timed and unhelpful, especially ahead of Mr Netanyahu's visit.

"I think it's typically Kevin Rudd," he said.

"It's very bad timing, poor judgement, unwise and out of touch with the changing reality. I think it's true that he's been a supporter of Israel and supports a two-state outcome as we all do, but his argument and facts he produces for this recognition are totally illogical and counter-productive to the objective of fostering a resumption of negotiations towards a two-state outcome."

Dr Rubenstein said the comments, and those by Mr Hawke, Mr Evans and Mr Carr, would not impact the upcoming state visit.

"These are figures from yesterday," he said.

"I think they're out of touch with the current Labor leadership which on these matters essentially have a bi-partisan approach with the Turnbull Government of support for the resumption of these direct bilateral negations."