Israeli Prime Minister Benjamin Netanyahu says  Israel needs to retain "security control" over any future Palestinian state, and has praised Australia as a "clear-eyed" nation "willing to puncture United Nations hypocrisy".
He made the remarks during a joint press conference in which he and Australian Prime Minister Malcolm Turnbull heaped praise on each other's countries.
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Turnbull praises Israel as an 'extraordinary' state
Visiting Israeli Prime Minister Benjamin Netanyahu remains equivocal on a two-state solution as Malcolm Turnbull praises Israel as "extraordinary". (Vision courtesy ABC News 24.)
Mr Turnbull welcomed Mr Netanyahu as the first Israeli prime minister to visit Australia, saying, "We have so much in common: shared values, democracy, freedom, rule of law, two great democracies, one small in size, one vast."
He described Israel as a "truly miraculous nation", founded on the "most ancient history" but still at the cutting edge of technology.
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Mr Netanyahu - who prefaced his remarks with a "G'day mate" - praised Mr Turnbull for his News Corp article, in which Mr Turnbull accused the UN of bias over recent resolutions condemning Israel for breaching international law.
Mr Netanyahu said he had been delighted to read what he described as the "seminal article" by Mr Turnbull.
The Israeli leader invited Mr Turnbull to Israel in October to mark the centenary of the charge of the Australian 4th Light Horse Brigade at Beersheba.
Asked about recent criticism of Israel by former Labor prime ministers Bob Hawke and Kevin Rudd over continued Israeli settlement expansion into the West Bank - which included their suggestion of the recognition of a Palestinian state - Mr Netanyahu said, "I prefer not to deal with labels but with substance."
He said the former Australian leaders should describe what kind of Palestinian state they were talking about, adding that such an entity could become a base for radical Islam intent on destroying the Jewish state.
Mr Netanyahu was also pressed on US President Donald Trump's recent remarks in Washington, which departed from long-held US policy by suggesting that Mr Trump was open to either a one-state or two-state solution between Israel and Palestine, so long as both sides were in agreement.
In response, the Israeli leader proposed a model that stopped short of full statehood for the Palestinians; they could have self-government if they recognised Israel and remained under the security control of Israel, he said.
"Look I don't want to incorporate 2 million Palestinians as citizens of Israel, nor do I want them as subjects of Israel," Mr Netanyahu said.
"We have to make sure that Palestinians recognise a Jewish state and ensure that Israel has the overriding security control of all the territories.
"Other than that, I want the Palestinians to be able to govern themselves and to have all the freedoms to do so, but not the freedom to destroy the Jewish state."
Mr Turnbull sidestepped direct commentary on Mr Trump's remarks, saying they had been "over-interpreted".
Referring to the rise of Islamic State, Mr Netanyahu said, "Many Arab countries recognise that they, too, have been threatened by ... malignant forces."
This gave him hope, he said, of a chance to "advance peace between us and them and ultimately between us and our Palestinian neighbours".
Mr Netanyahu brushed off questions about his close relationship with James Packer, which is part of a wider investigation in Israel into the links between the Israeli leader and a number of billionaires.
"I think nothing will come of it because there is nothing there except friendship," Mr Netanyahu said.
The press conference was held at the Prime Minister's official residence in Sydney, Kirribilli House, under tight security with only two questions allowed from the Australian media pack and two from the visiting Israeli media.
Security was also tight around the Central Synagogue in Sydney's Bondi Junction where both leaders received rousing standing ovations on Wednesday evening. Mr Turnbull - whose electorate contains the synagogue - referred to it as "my local shul" using the informal Jewish term.
Guests included former Liberal Prime Ministers John Howard and Tony Abbott and NSW Premier Gladys Berejiklian, as well as Jewish business and religious leaders and community leaders from around Australia.
Mr Turnbull said it was impossible to imagine the success of modern Australia without the "brilliance and enterprise of the Australian Jewish community". He said he would accept Mr Netanyahu's invitation to Israel for the 100th anniversary of the cavalry charge at Beersheeba. "Bibi has promised everyone a horse", he joked.
Mr Netanyahu began his address to the synagogue audience with an emotional reference to Jerusalem as "our eternal capital never to be divided again".
"There is no better friend [than Australia] for the state of Israel" he said, echoing sentiments he'd expressed earlier in the day at an official lunch.
"When I colour the map, I colour Australia in the same colour as the United States" he had told the lunchtime audience.
In some of his strongest language in support of Israel to date, Â Mr Turnbull again turned his guns on the United Nations on Wednesday night, slamming a recent UN resolution that accused Israel of breaching international law.
"My government will not support anymore than the government of John Howard would, or the government of Tony Abbott would, a resolution so one-sided, attributing fault only to the state of Israel" he said.
Australia is at odds on the issue with France and the UK, which supported the Security Council resolution. The United States - at the time under President Obama - abstained.