"I am confident that previous Australian funding to the PA through the World Bank has been used as intended," Bishop said. Australia's $10million will now be sent to the Humanitarian Fund for the Palestinian Territories of the United Nations.

Each year, Australia donates US$10 million to the World Bank's trust fund for Palestinian recovery and development, direct aid to the Palestinian government. But, the donation has now been terminated.

The Australia Government has discontinued the donation claiming to be "concerned that in providing funds for this aspect of the Palestinian Authority's (PA) operations there is an opportunity for it to use its own budget to activities that Australia would never support," according to Foreign Minister Julie Bishop, in a statement.

"I am confident that previous Australian funding to the PA through the World Bank has been used as intended," Bishop said.

Australia's US$10-million gift will now be sent to the Humanitarian Fund for the Palestinian Territories of the United Nations, to provide health care, food, water, sanitation and shelter to vulnerable Palestinian populations.

Foreign Minister Bishop added that "any assistance provided by the Palestine Liberation Organisation to those convicted of politically motivated violence is an affront to Australian values and undermines the prospect of meaningful peace between Israel and the Palestinians."

In March. the U.S. Government passed a law that suspended financial aid to Palestinians. The decision was condemned by Palestinian official Nabil Abu Rdeneh, who said the move did not "allow for the creation of an atmosphere conducive to peace."