The UN Assembly, not the UN Security Council (UNSC), has designate Palestine a non-member observer state, which is the same standing accorded to the Vatican.
Unlike the UN General Assembly, the UNSC is where 5 original nuclear-power nations (USA, Russia, China, France and Britain) have veto powers. It's also where the USA has repetitively misused this veto powers to veto UNSC resolutions against Israel, by more than 140 times since 1972.
It has been reported that the USA had, during the period between 1972 and 2001, (mis)used its veto power in the UNSC a humongous 39 times to block resolutions critical of Israeli policies in the Occupied Palestinian Territories, more than all the other 4 countries with veto powers have used their veto on all other issues combined.
But leaving aside the predictable USA, a hopeless politico-religious slave to Israeli interests, the abstention of Australia has been a watershed decision in the Australian-USA-Israeli relationship.
Australia is like the USA, tied by political alliance and allegiance to foreign countries like the USA and Israel. The Israeli lobby in Australia is particularly powerful but more subtle than its American counterparts. But it's still too powerful to be ignored or to offend in the eyes of Australian main political leaders
Many had predicted (quite correctly so) that Australia would AUTOMATICALLY side with the USA and Israel to object to UN Assembly recognition of Palestine. But PM Julia Gillard had to abandon her politically-natural intentions to do so when the Labor Party caucus (top party council) revolted against that plan.
The Labor Party caucus and indeed membership are sympathetic to the plight of the oppressed Palestinians.
It's a wonderful decision, a 1st step in the right direction and we eagerly await the day when Australia will move beyond mere abstention and actually vote FOR the full recognition of Palestine as a UN member state.