Australia rejects calls to mirror Trump's Israel policy
Abbott made the suggestion in an opinion piece published by The Spectator magazine, saying that the island nation could show its "unswerving support for Israel" by following a possible move by US president-elect Donald Trump's administration in the same direction.
Bishop, however, was quick to shoot down Abbott's idea.
"The Australian government does not have any plans to move the Australian embassy from Tel Aviv to Jerusalem," she said in a statement.
Abbott, who recently returned from the Middle East where he attended the Australia-Israel-UK Dialogue in Jerusalem, also called for his country to suspend aid to Palestine. The Liberal Party MP claimed that this action should be taken because Australian funds are "paying pensions to terrorists and their families".
Australia currently gives over $40 million a year in aid to Palestine via United Nations agencies and charities. This money is used for providing Palestinian refugees with healthcare, education and water and sanitation facilities.
Bishop also rejected Abbott's claims about funds, saying that Australia's aid programme has a robust risk management and due diligence process, as well as a zero tolerance policy towards fraud and corruption.
Acting opposition leader Chris Bowen also stepped in to defend Australia's aid to Palestine, saying that the funds are vital to countering extremism and promoting peace in the Middle East.
"Mr Abbott is clearly using this as yet another issue to undermine Malcolm Turnbull and continue his campaign to regain the leadership by appealing to the hardliners in the Liberal Party," Bowen told AAP.