Israel described the move as a step in the right direction.
Hotovely, one of the Israeli officials to attend Zurabishvili's swearing-in ceremony on December 16, noted the "deep and long friendship" between the two countries before saying that Jerusalem wanted to see Georgia move its embassy to Israel's capital of Jerusalem.
"The position of the Palestinian people, its leadership and its government is that we will not drop our legitimate rights for aid and money", he said.
The Palestinians have boycotted Washington since Trump formally recognized Jerusalem as the capital of Israel and transferred the USA embassy there.More news: Michelle Obama's Thoughts As She Left The White House? 'Bye Felicia!'
He said the decision respects both a commitment to a two-state solution and longstanding respect for relevant UN Security Council resolutions.
Bahraini minister Sheikh Khalid bin Ahmed Al Khalifa said the Australian decision would not damage Palestinian hopes of a sovereign state with East Jerusalem as its capital.
For decades the worldwide community maintained that the city's status should be negotiated between Israel and the Palestinians.
Indonesia's foreign ministry spokesman, Arrmanatha Nasir, noted that Australia had not moved its embassy to Jerusalem and called on all members of the United Nations to recognise a Palestinian state "based on the principle of two-state solutions".More news: Teen vaping soars as opioid use, drinking decline
In his speech to Channel 10, a senior official said that the Israeli occupation was disappointed that Australia didn't recognize the entire city as the capital of Israel.
The move follows partially in the footsteps of the United States, which moved its embassy to Jerusalem from Tel Aviv in May. "Jerusalem has always been under Palestine, so why are they taking the initiative to divide Jerusalem not belonging to them, but to divide the Arabs and the Jews?" A cabinet minister, Tzachi Hanegbi, was more critical, saying that Canberra "made a mistake".
He referred to Canberra as a "deep and intimate friend of many years' standing", but added: "There is no division between the east of the city and west of the city". Our sovereignty will not be partitioned nor undermined.
It marked the first visit by an Israeli leader in more than 20 years to the tiny Gulf state, a USA ally that has in the past facilitated negotiations between the United States and Iran. "They have no right", he said.More news: Talks adopt ’rulebook’ to put Paris climate deal into action
"Jerusalem should remain as it is now and not the capital of Israel", the Malaysian PM said.