US Ambassador Jeffrey Bleich says America disagrees with Australia's decision to support observer status for Palestine in the United Nations but supports our right to make it.

"In our opinion (observer status) will not advance the peace process and the ultimate creation of a two state solution (in the Middle East) to have this status conferred at this point to the Palestinians," he said a short time ago. "So we will be voting against it."

Australia is set to abstain from the vote, a move that effectively endorses the motion to grant the Palestinians' observer status, when the question is put to the UN General Assembly.

The stand has been interpreted as a setback for Prime Minister Julia Gillard who is reported to have wanted Australia to join with the US and Israel in voting against.

Ambassador Bleich said America "looked to the judgement of our allies and partners around the world to make their own assessment" on such issues. "I won't be commenting on what Australia has decided to do; I can only tell you what the US position is," he said.

"It is not my position to look to what Australia might or might not do but simply to work with them (the Australian Government) once they have made the decisions they make by working through (the) democratic process."

Asked if the Australian decision to abstain could damage the US Australian relationship, the Ambassador gave an unequivocal 'no'.

"The relationship is deeply grounded between the two of us," he said. "We continue to work through our international issues together and even where we have differences in terms of how we cast our votes we always manage to progress further because we always have the same objective; Australia and the US feels we ultimately need to have peace in this region (the Middle East) and a two state solution between Israel and the Palestinians."