Netanyahu said in a tweet that Morrison had informed him that he was considering officially recognising Jerusalem as Israel's capital and moving the Australian Embassy to the city.
Morrison also announced that Australia would vote against a United Nations resolution this week to recognise the Palestinian Authority as the chair of the Group of 77 developing countries and would review the 3-year-old Iran nuclear deal.
Australia's Labor Party said the announcement was a desperate attempt to win the byelection in the Wentworth electorate.
"The people of Wentworth, and all Australians, deserve a leader who puts the national interest ahead of his self-interest, and governs in the best long-term interest of the nation," said Labor's penny Wong.
When the Government forced former Prime Minister Malcolm Turnbull from office in August, he quit Parliament. If Sharma is not elected as the new MP for Wentworth, the Government will lose its single-seat majority in the House of Representatives.
George Browning, president of the Australia Palestine Advocacy Network, accused the Government of "aligning itself with the most erratic, reactionary and bullish US foreign policy ever". "This is an irresponsible policy that compromises the future of millions of people in the Middle East for a handful of votes in Wentworth," Browning said.
Morrison denied that the US or the byelection had influenced his announcement.
"I have made this decision without any reference to the United States. It has not come up in any discussion I have had with the President or with officials," Morrison said.
"There has been no request, and there has been no discussion with the United States. Australia makes its decisions about its foreign policy independently. We do so in our own national interests consistent with our own beliefs and our own values."
- AP
