Australia has decided to remove the term "occupied" when referring to east Jerusalem, a move blasted by Palestinians as "toxic" and an ostacle to peace and welcomed by Israel.
The issue flared in the Senate this week with Attorney-General George Brandis issuing a statement to clarify Canberra's stance on the controversial question of the legality of settler homes.
"The description of areas which are the subject of negotiations in the course of the peace process by reference to historical events is unhelpful," he said Thursday.
"The description of east Jerusalem as 'occupied' east Jerusalem is a term freighted with pejorative implications which is neither appropriate nor useful.
"It should not and will not be the practice of the Australian government to describe areas of negotiation in such judgmental language."
He added that Canberra supported a peaceful solution to the dispute "which recognises the right of Israel to exist peacefully within secure borders and also recognises the aspiration to statehood of the Palestinian people".
Israel seized the West Bank, including Arab east Jerusalem, in the Six Day War of 1967.
It later annexed east Jerusalem in a move that has never been recognised by the international community.
Brandis quickly drew Palestinian ire.
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"It is absolutely disgraceful and shocking that on the 47th anniversary of Israel’s military occupation... Australian Attorney-General George Brandis is issuing such inflammatory and irresponsible statements," said Hanan Ashrawi, a senior Palestine Liberation Organisation official.
"Such pronouncements are not only in blatant violation of international law and global consensus, but are also lethal in any pursuit of peace and toxic to any attempt at enacting a global rule of law," she said in a statement released early Friday.
But Israeli Foreign Minister Avigdor Lieberman welcomed the "serious" move by Australia, which he said was not afraid to "tell the truth regarding the conflict between Israel and the Palestinians."
Brandis sparked a heated debate in the Senate Wednesday evening when he stated that no Australian government of either political persuasion "acknowledges or accepts" the use of the word "occupied".
A number of senators disagreed, pointing out that Australia had voted in support of UN resolutions in 2011 and 2012 where such language was used to describe settlements in east Jerusalem.
Independent Senator Nick Xenophon suggested that dropping the term "occupied" would represent a "massive shift" in Australia's foreign policy, Australian Associated Press reported.
Australian Greens leader Christine Milne Friday called it "an outrageous backdown" by the Tony Abbott-led government.
"It is inflammatory behaviour and at odds with the peace process," she said in a statement.
"The use of the term 'Occupied Palestinian Territories' is the accepted term used by the UN.
"The Israeli settlements built after 1967 are illegal. The settlements contravene the Fourth Geneva Convention."