Penny Wong has stepped up debate about recognition of a Palestinian state after declaring it the only solution to achieving lasting peace in the Middle East.
The foreign minister has sparked an angry reaction from some quarters but received public support from Anthony Albanese.
In a major speech, Senator Wong said formally recognising Palestine could be the only way of ending a cycle of violence in the region.
"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 told a National Security College conference.
"It also strengthens the forces for peace and undermines extremism."
While no formal decision has been made on Palestinian recognition, the prime minister said there had been no change on the stance of a two-state solution.
"The issue on a two-state solution is one that Australia has had for a long period of time ... we have persistently said that we need a long-term political solution in the Middle East," Mr Albanese told reporters on Wednesday.
"What we want is Israelis and Palestinians to be able to live in peace and security with stability and to be able to prosper in the future in a region which is peaceful."
Mr Albanese said Hamas was a terrorist organisation and could not have a legitimate role in any Palestinian state.
The government has raised concerns about Israel's observance of international humanitarian law following the killing of seven aid workers in Gaza, including Australian Zomi Frankcom.
US president Joe Biden has urged Israel to call a ceasefire and criticised the nation's prime minister Benjamin Netanyahu's approach on Gaza as a "mistake".
Senator Wong said it was important to look at international discussion about how to secure peace in the Middle East.
"Obviously, we have the immediate conflict, we need to see Hamas release hostages, we need to see a revitalised Palestinian Authority, we need to see an immediate humanitarian ceasefire," she told ABC Radio.
"Ultimately, peace and security for Israel will only be achieved if we have a Palestinian state alongside the Israeli state."
Opposition spokesman Simon Birmingham said calls to recognise Palestine "put statehood before security".
"The reality, however, is that a two-state solution will only be possible with security and confidence that the right of each party to exist will be respected by the other," Senator Birmingham said.
"It is downright dangerous to reward such barbaric conduct with a fast track to recognition of statehood."
Executive Council of Australian Jewry co-chief executive Alex Ryvchin said Senator Wong's comments were disappointing.
"They are no doubt well intentioned and the foreign minister wants an end to the conflict as we all do," he said.
"But when Israel is in the fight of its life against Hamas, to lecture an ally seems callous and inappropriate."
Senator Wong said efforts to recognise Palestinian statehood would have benefits for Israel.
"I don't see, ultimately, any security for Israel without the issue of Palestinian statehood being resolved," she said.
Australian Palestine Advocacy Network president Nasser Mashni said Australia should join with other nations and recognise Palestine.
"Australia's recognition of Palestine would send a signal to the world – that Australia supports the consistent application of international law," he said.
"Recognition is a first step towards upholding the full rights of Palestinians, including the right to self-determination, dignity and equality in their homeland."
The conflict in Gaza was triggered by Hamas' cross-border attack in southern Israel on October 7, that left 1200 people dead and more than 250 people taken hostage, according to Israel.
More than 33,000 Palestinians have been killed in six months of conflict, Gaza's health ministry says.
