Australian Minister to Meet Ambassadors over E. Jerusalem Row

Australia's foreign minister will meet ambassadors angered by the country's decision to stop referring to East Jerusalem as "occupied", Prime Minister Tony Abbott said Sunday as he stressed there was "no change in policy".

Australia has been warned of possible Arab trade sanctions after last week's move, which Attorney-General George Brandis said was made because the term "occupied" carried pejorative implications and was neither appropriate or useful.

But the decision has sparked fury in the Arab world, and on Thursday 18 diplomats from countries including Egypt, Saudi Arabia and Indonesia protested to Australia's Department of Foreign Affairs in Canberra.

Israel seized East Jerusalem during the 1967 Six-Day War and later annexed it, in a move never recognised by the international community.

Abbott, speaking in Houston as part of an official trip to the United States, said Australia was "very happy to clarify the position and on trade".

"My understanding is that there is going to be a meeting between some of the ambassadors and Foreign Minister (Julie) Bishop in a couple of days' time," the prime minister said.

"We are very happy to clarify the position and on trade. People trade with us because we are a good trading partner... Nothing that has happened in the last couple of days could detract from that."

The head of the Palestinian delegation to Canberra warned Friday that Australia could face trade sanctions by Arab nations over the new stance.

Australia's export trade with the Middle East accounts for billions of dollars annually, particularly in wheat and meat, with Qatar and Jordan major markets for live sheep.

Abbott said there was "absolutely no change" to Australia's policy on the Israeli-Palestinian conflict, and the shift on East Jerusalem was "simply a terminological clarification".

"We strongly support a two-state solution," he said. "We are giving, I think, Aus$56 million ($53 million) in aid this year to Palestine. No change in policy."

Israel has hailed the Australian move as "refreshing".

The Palestinians claim Arab East Jerusalem as the capital of their promised state. 

The international community views Israeli construction on land seized in 1967, including East Jerusalem, as illegal and a major obstacle to a peace agreement.

Bishop on Sunday blamed the opposition Labor Party for the uproar, telling Ten News it was a "complete and utter overreaction".