In January, Australia joined a slate of other nations in suspending funding for the organisation as the allegations were investigated.

While the initial report said 30 agency staff had been involved, it found less than half were staff, the assistant secretary for the foreign affairs department's Middle East division told a Senate hearing on Thursday. 

Australia has been advised two people were fired and further investigations by the UN were taking place into about 10 employees, Marc Innes-Brown said.

There was no evidence against three others.

A report claiming 3000 agency teachers were part of a Telegram channel celebrating the October 7 attacks wasn't substantiated, Mr Innes-Brown said.

"I'm not sure where the 3000 came from, but the channel wasn't set up by UNRWA, it was people seeking work with UNRWA," he said.

A picture circulated with the report alleging those 3000 people were dancing in the streets celebrating the attack was also false, Mr Innes-Brown said.

The photo, investigated by the Australian office in Ramallah, was taken before the attack and showed a protest outside the relief agency's headquarters related to compensation for the 2014 conflict.

There were sometimes "kernels of truth" in the allegations made by groups who want the Palestinian aid agency disbanded, Mr Innes-Brown said. 

"But ... unfortunately often these reports can contain a significant amount of exaggeration," he said. 

Foreign Minister Penny Wong defended the decision to suspend funding in January, saying it was in line with international partners, but said she was still waiting for Israel's evidence after requesting it.

"I would hope that the Israeli government would ensure that its friends and partners are provided with that information," she said.

The lack of evidence "smacks of a political decision", Greens senator Mehreen Faruqi said.

Australia's pledge of $46.5 million in humanitarian assistance would be delivered in full, Senator Wong said.

In a joint statement on Thursday, the prime ministers of Australia, New Zealand and Canada said they were "gravely concerned" about a military offensive in Rafah. 

Such an invasion would be catastrophic, they said, with 1.5 million Palestinians taking refuge in the area, many at the behest of Israeli forces.

"Palestinian civilians cannot be made to pay the price of defeating Hamas", they said, again condemning the designated terrorist organisation and calling for the release of hostages.

"We urge the Israeli government not to go down this path. There is simply nowhere else for civilians to go."

The devastation of a ground invasion "would be unjustifiable," Senator Wong added, saying Israel had yet to produce a credible plan on how it would ensure the safety of civilians.

The Executive Council of Australian Jewry shared concerns about civilians but said the government offered no alternatives to defeat Hamas and rescue some 130 hostages. 

"Israel has the right and the duty to defeat Hamas by force," co-CEO Alex Ryvchin said.

The Zionist Federation of Australia said it was disappointing and unreasonable for the three nations to both call for Hamas to be removed from power and for Israel to refrain from entering Rafah to destroy the stronghold.

"Israel ...  has made it clear that it would only commence a ground operation in Gaza after ensuring there are arrangements in place to minimise civilian casualties," President Jeremy Leibler said.

Since Hamas killed 1200 Israelis in its October attack, more than 28,000 Palestinians have been killed by Tel Aviv's offensive according to the Gaza Health Ministry.

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