Australia's treasurer on Friday said Malaysian Prime Minister Mahathir Mohamad had a history of anti-Jewish statements, in an escalating war of words over the possibility Australia might move its Israeli embassy to Jerusalem.
Australian Prime Minister Scott Morrison proposed the embassy move during a local election campaign last month, sparking concern from Indonesia and Malaysia.
Malaysian Prime Minister Mahathir Mohamad raised the potential embassy switch in a meeting with Australian counterpart Scott Morrison at a regional summit in Singapore on Thursday, later telling reporters such a move could increase the threat of terrorism.
"I pointed out that in dealing with terrorism, one has to know the causes," Mahathir said. "Adding to the cause for terrorism is not going to be helpful."
Australian Treasurer Josh Frydenberg responded Friday, saying Canberra would make its own decisions. Frydenberg, the son of a Holocaust survivor, also pointed out past comments that the leader of Muslim-majority Malaysia has made about Jewish people.
"He has called Jews 'hooked-nosed people.' He has questioned the number of people that have been killed in the Holocaust. He banned 'Schindler's List' as a movie being shown," Frydenberg told reporters in Melbourne.
Malaysia's film board rejected the movie as Zionist propaganda at the time.
Australia's indication that it may follow the United States' contentious move of relocating its embassy to Jerusalem from Tel Aviv was seen by many Australians as a political stunt. Critics called it a cynical attempt to win votes in a by-election last month for a Sydney seat with a high Jewish population.
But on Friday, Frydenberg insisted shifting the embassy made sense, although it has also inflamed tensions with Australia's closest neighbor, Muslim-majority Indonesia.
"Australia already recognizes Israel's sovereignty over west Jerusalem. It's where the Israeli parliament is. It's where the Australian ambassador presents his or her credentials. It will be the capital of Israel under any two-state solution," Frydenberg said.
Morrison said Friday that a decision on the embassy would be made by Christmas, but rejected fears the plan had caused collateral damage by placing in jeopardy a proposed free trade agreement with Indonesia.
"I do not conflate the issues," Morrison told Australian Broadcasting Corp.
"What we need to understand is that Australia has to set its own foreign policy and all I have said is that we would consider this question if we believed that it would advance the issues of the two-state solution."
Indonesian opposition politician Dian Islamiati Fatwa also warned this week that Australia moving its embassy may provoke Islamic radicals in his country.
"I pointed out that in dealing with terrorism, one has to know the causes," Mahathir told reporters afterward, Australian media reported. "Adding to the cause for terrorism is not going to be helpful."
Some 60% of Malaysia's population is Muslim.
Indonesia has also expressed concern over the embassy review and suggested it might upset plans for a free trade agreement with Australia, though Morrison has said the issues were not conflated during recent talks he had with Indonesian President Joko Widodo.
Indonesia is the world's biggest Muslim-majority country, where tens of thousands protested against President Donald Trump's decision in May to move the U.S. embassy to Jerusalem.
Speaking on Friday, Morrison confirmed Mahathir had raised the subject of the embassy but declared that only "Australia determines Australian foreign policy.
"I think what Josh said today was filling in the history of his [Mahathir's] record on various issues over time," Morrison told reporters on a visit to Darwin, where he is due to meet Japanese Prime Minister Shinzo Abe.
"Make no mistake. I will not have our policy dictated by those outside the country," Morrison added.
Australia and Malaysia have had a sometimes rocky diplomatic relationship. The two countries clashed 25 years ago when former Australian Prime Minister Paul Keating called Mahathir "recalcitrant" for boycotting the 1993 Asia-Pacific economic forum.
