Victorious Howard rallies Australia

John Howard has won a third term in office

Australian Prime Minister John Howard has been speaking about the challenges ahead after his conservative coalition won a third term in the general election.

"I cannot express to you the sense of honour and privilege I feel once again being elected as prime minister of the greatest country in the world," he told cheering supporters at a Sydney hotel.

I'm afraid tonight I have to concede defeat

Labor leader
Kim Beazley

Opposition Labor Party leader Kim Beazley has resigned after conceding defeat.

In another development, a leading economist said Australia was likely to cut official interest rates before the end of the year following Mr Howard's victory.

With more than 80% of the vote counted, Mr Howard's Liberal Party had won 68 seats in the 150-seat lower house of parliament.

Its ally, the National Party, took 12 seats giving the conservative coalition a swing of 2.2%, the greatest to an incumbent government since 1966.

Labor won 67 seats and independent candidates won three.

In his victory speech, Mr Howard, 62, said Australia faced some new and unexpected challenges.

Kim Beazley is standing down as Labor Party leader

"All of us are deeply conscious of the changes that have come over the world and therefore over our own nation since the terrible events in the United States of 11 September," he said.

"It requires of all of us of goodwill, with a faith in freedom and a belief in the great principles upon which this nation has been built, that we come together; we bind together in unity."

But BBC correspondent Red Harrison in Sydney says candidates on all sides agree that the most important factor in the election was the government's determination to keep illegal migrants out of Australia.

Popular decisions

In an editorial on Sunday, the Sun-Herald newspaper said: "With the task ahead more daunting than ever, Howard will need more than his legendary luck to ensure his prime ministership goes down in history as one of his party's greatest success stories."

Mr Howard's popularity was boosted by his hard-line stance against asylum seekers, as well as by his support for the US-led war on terror.

Both these decisions proved hugely popular with blue collar workers, the traditional supporters of the Labor Party.

The asylum issues dominated the campaign

Significantly, support for Pauline Hanson's anti-immigration party, One Nation, fell right across the country.

Most Australian newspapers backed Mr Howard in their editorials, saying Australia's best hope for the future lay in re-electing him.

Six months ago, he was trailing in every opinion poll, but by the start of the election campaign last month he was the clear favourite.

Mr Beazley supported the tough line on immigration and the use of Australian troops to help the US in Afghanistan, but preferred to talk about domestic issues.

Voting is compulsory in Australia and nearly all the 12.6m people registered to vote were expected to do so.

Rate cut expected

Craig James, chief economist with commonwealth Securities, said he was confident the Australian Reserve Bank would cut rates by another 0.5% in December.

At its board meeting five days ago, the Reserve Bank refrained from any move because of the election.

"We're looking for a half of one per cent. The Reserve Bank board don't meet in January and certainly a half a per cent over November or December seems the best option," Mr James said.

America, Britain and the European central bank have all cut their interest rates in the past week.