The travel advisory is "a result of the failure of Australian authorities to stand up against persistent demonisation, harassment and violence against Jews and Jewish institutions in Australia".
Rabbi Abraham Cooper sent a letter to Australia's US ambassador Kevin Rudd to tell him of its decision and outrage Jewish Australians were being targeted by hate crimes.
"We are not convinced that Jews are safe as the authorities have failed to take necessary measures to protect Jewish communities from increasingly belligerent and violent targeting by lslamists and other extremists," he said.
He noted the Adass Israel Synagogue attack came within days of Australia voting for a UN resolution against Israel earlier in December.
"Such a resolution, far from strengthening hopes for peace only emboldens those who seek Israel's demise, who demean Jewish history, and who hate Judaism, Zionism, and Zionists," he said.
The Simon Wiesenthal Center holds consultative status at the United Nations and the Council of Europe as well as other governing bodies.
Israel itself has a level two threat on Australia advising travellers to increase precautionary measures since the fire at the synagogue at Ripponlea in Melbourne's southeast on Friday.
Australia, meanwhile, has told its citizens to reconsider their need to travel to Israel and the Occupied Palestinian Territories due to the ongoing war in Gaza.
Premier Jacinta Allan hit out at the threat warning, saying "Melbourne, and Victoria continues to be a good, strong, safe place to live and to visit".
"Victoria Police have established operation Park, which is keenly focused on investigating incidences related to conflict in the Middle East," she said.
But police have been criticised for being too slow to act against anti-Semitism as officers hunt the people who firebombed the synagogue.
The arson attack was the final straw in a terrible year for the Jewish community Australia's special envoy to combat anti-Semitism Jillian Segal said.
Jillian Segal says multiple factors have contributed to the rise in anti-Semitism. (Thomas Parrish/AAP PHOTOS)
"The rise in anti-Semitism is just completely unacceptable but what we need now is a co-ordinated response," Ms Segal said on Tuesday as she called for strong action.
Israel's ambassador to Australia Amir Maimon visited the synagogue on Tuesday morning and toured the wrecked building, saying he was shocked and saddened by the attack.
"But I am encouraged by the strength of the community, the president and the community leadership, they are strong, they are united and the synagogue will be open in the very near future," he said.
Israel's Ambassador to Australia Amir Maimon (R) has inspected the Adass Israel Synagogue. (Joel Carrett/AAP PHOTOS)
Members of the community arrived throughout the morning to observe the fenced off synagogue, inspecting notes and bouquets of flowers left attached outside.
The destruction from the arson attack was laid bare in photos from inside the charred building. (Yumi Rosenbaum/AAP PHOTOS)
The firebombing is being investigated as a likely terror attack with the Joint Counter Terror Team (JCTT) taking the lead as authorities hunt three suspects.
The terror declaration of the fire opens up a raft of extra powers for investigators including the ability to stop, search and seize people without a warrant as well as detain and question those they believe have knowledge of, or links to, the attack.
The JCTT is made up of state and federal police and ASIO officers.
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