Defence Minister Christopher Pyne has expressed regret over Australia's reluctance to take leadership on delivering a two-state solution between Israel and Palestine.
Mr Pyne told a Sky News defence summit in Adelaide that Australia had shown leadership on "niche" areas such as capital punishment, land mine clearance and gas exports.
"Why haven't we been the country, for example, that's said let us lead a peace process in Israel and Palestine?" he asked on Friday.
"We've left it to the Norwegians and the Swedes and other countries."
Mr Pyne, who is retiring at the next election, said Australia was widely viewed as an honest broker.
"That's an area where I regret that in my 26 years in politics that I've never been able to get a government to sort of say, 'Well why don't we make a proposal to the Palestinians and the Israelis and try to make a breakthrough'?"
"We've never seen that as our role, and I think we should."
Late last year, Prime Minister Scott Morrison floated the idea of shifting Australia's embassy in Israel from Tel Aviv to Jerusalem.
He revised this politically-charged proposal in February, opting to open a trade and defence office in the city instead.
The prime minister confirmed Australia recognised West Jerusalem as the capital of Israel, and would recognise East Jerusalem as the capital of Palestine when a two-state solution was eventually struck.
"That was actually quite a significant decision of any country in the world to actually say we would recognise Jerusalem as basically a dual capital," Mr Pyne said.
The defence minister acknowledged Israel was "not that pleased" with the suggestion.
"They didn't say much about it because they were happy that West Jerusalem would be recognised as the capital of the state of Israel," he said.
"But they would've regarded that as a movement of the discussion on a subject they really regard as their own subject, rather than them being interfered with."
Labor's defence spokesman Richard Marles said Australia had sometimes failed to show leadership in the Pacific.
"I think we, Australia, have been reluctant to come forward with strategic leadership and I think we need to," he told the summit.
