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Australian Foreign Minister Penny Wong has suggested the federal government is contemplating recognising Palestinian statehood, saying international recognition could help "build momentum towards a two-state solution" with Israel.
The question of what stance Australia should take on Palestinian recognition has long been fiercely contested within the Labor Party.
The Coalition lashed out at the government last year when it again adopted the term "Occupied Palestinian Territories" while labelling Israeli settlements in the West Bank as "illegal".
The government has ramped up criticism of Israel in recent months as violence has intensified in Gaza.
It has also appointed former ADF chief Mark Binskin to scrutinise Israel's investigation of the air strikes that killed Australian Zomi Frankcom and six other aid workers.
The United Kingdom has appeared to edge towards international recognition of the territories as a state recently, with UK Foreign Secretary David Cameron suggesting London could take that step even as protracted talks between Israel and Palestinian leaders drag on.
However, Mr Cameron has stressed the UK would not make the move while Hamas remained entrenched in Gaza.
Now, Senator Wong has used her speech at ANU's National Security College "Securing our Future" conference to echo some of the arguments the UK has made in favour of recognition.
"The failures of this approach by all parties over decades — as well as the Netanyahu government's refusal to even engage on the question of a Palestinian state — have caused widespread frustration," she said on Tuesday night.
"So the international community is now considering the question of Palestinian statehood as a way of building momentum towards a two-state solution."
She also cited Mr Cameron's statement that recognition could help make a two-state solution "irreversible", while rejecting arguments it could encourage Hamas and its supporters to launch further terrorist assaults on Israeli civilians.
"There are always those who claim recognition is rewarding an enemy. This is wrong," she told the conference.
"First, because Israel's own security depends on a two-state solution. There is no long-term security for Israel unless it is recognised by the countries of its region."
Israel had already succeeded in normalising ties with Bahrain, the United Arab Emirates and Morocco under the Abraham Accords, before Hamas' terrorist attacks on October 7.
But Senator Wong argued in her speech that the process of normalisation was unlikely to succeed further given the political statement over the Occupied Territories' future and widespread anger across the region over conditions in Gaza.
"The normalisation agenda that was being pursued before October 7 cannot proceed without progress on Palestinian statehood," she said.
"Saudi Arabia has made clear there will be no diplomatic relations with Israel unless an independent Palestinian state is recognised."
Senator Wong also argued that proceeding with the recognition of a Palestinian state and a two-state solution would help marginalise Hamas, a "terrorist organisation … which has the explicit intent of the destruction of the state of Israel and the Jewish people … [and] also rains terror on the Palestinian people".
"Recognising a Palestinian state — one that can only exist side by side with a secure Israel — doesn't just offer the Palestinian people an opportunity to realise their aspirations," she said.
"It also strengthens the forces for peace and undermines extremism. It undermines Hamas, Iran and Iran's other destructive proxies in the region.
"A two-state solution is the only hope to break the endless cycle of violence."
Zionist Federation of Australia president Jeremy Leibler said any talk of recognition of Palestinian statehood "in such close proximity" to the October 7 attacks was "entirely premature and will be seen as a reward for those attacks".
"Before any talk of statehood is credible, Hamas must be removed and a new generation of Palestinian leadership must emerge, which isn't corrupt, don't condone violence and recognises Israel's right to exist as a Jewish state," he said in response to Senator Wong's speech.
Earlier on Tuesday, Prime Minister Anthony Albanese urged his Israeli counterpart Benjamin Netanyahu not to push ahead with a flagged ground invasion of Rafah in southern Gaza.
The federal government is continuing to press for more "transparency" from Israel over the death of Ms Frankcom last week.
On Monday night, Israel Defense Forces (IDF) spokesperson Peter Lerner revealed to the ABC that Israeli military lawyers were looking at whether a criminal investigation could be launched into the deadly air strikes.
On Tuesday, Mr Leibler criticised the appointment of Air Chief Marshal Binskin as a special adviser on the issue, saying Israel was already "rightly taking responsibility" for the tragedy.
"We are concerned because the government is imposing a double standard on its ally and fellow democracy that has never been applied to any other country," he said.
"And we are confused because, listening to certain cabinet ministers, they'd have you think this special adviser has actually been tasked with investigating a laundry list of their outrageous claims, including that Israel intentionally kills aid workers and systematically disregards humanitarian law.
"No other country has made this demand because it is unjustified. It is to impose on Israel — the victim of a barbaric terrorist attack — a demand [by an ally] that neither Australia nor any like-minded country would accept."