OECD upbeat on Australian economy

Mr Howard is now the second longest-serving Australian PM

The Australian economy will grow 3% this year, rising to 3.5% in 2007, the Organisation for Economic Cooperation and Development (OECD) says.

Its latest report on Australia portrays an impressive economic performance in recent years, helped by high global commodity prices.

The strength of the economy has led to continuing popularity for Australian Prime Minister John Howard.

He has now said he will contest elections for a fifth term in office.

Chinese factor

According to the OECD, Australia's large mining sector is continuing to benefit from China's economic boom.

Demand by Chinese firms for raw materials has led to prices for commodities such as copper hitting record highs this year.

But the OECD warned that although Australia was continuing to feel the benefits of this situation, Canberra also had to guard against both inflationary pressures and the eventual downturn in commodity prices.

Australian government figures showed last week that inflation rose to 4% in the second quarter of 2006, above the Reserve Bank of Australia's 2-3% target range.

As a result, the central bank is widely expected to raise interest rates to 6% later this week, their highest level since 2000.

The next Australian general election is due to take place in late 2007.

Mr Howard, 67, and his right-leaning Liberal Party have so far been in power for a decade, making him the second longest-serving Australian Prime Minister.