Welsh-born PM calls for Queen to be final monarch of Australia

Australia should drop its ties to the British monarchy after Queen Elizabeth II's reign, the prime minister has said, raising the contentious issue of a republic just days before tightly contested national elections.

• Republic call: Julia Gillard

Julia Gillard, whose centre-left Labour Party has long held the belief the country should rid itself of the British monarch as its head of state and become a republic, said Australians have "deep affection" for Queen Elizabeth II but that she should be Australia's final monarch.

"What I would like to see as prime minister is that we work our way through to an agreement on a model for the republic," Ms Gillard, who was born in Wales, said.

"I think the appropriate time for this nation to move to be a republic is when we see the monarch change.

"Obviously I'm hoping for Queen Elizabeth that she lives a long and happy life, and having watched her mother I think there's every chance that she will."

The queen is 84, and her mother lived to age 101.

Many Australians feel loyalty to queen, but younger Australians especially view the idea of a foreign royal being the country's highest power as anachronistic.

The British monarch is formally Australia's head of state, and its representative, the governor general, swears in the government and signs legislation into law. Australian coins bear the Queen's profile. Governing power, however, resides with the elected government.

Many members of the opposition Liberal Party are monarchists, and its leader, Tony Abbott, said he sees no need to change the status quo.

"Our existing constitutional arrangements have worked well in the past and I see no reason whatsoever why they can't continue to work well in the future," he said. "So while there may very well be future episodes of republicanism in this country, I am far from certain - at least in our lifetimes - that there is likely to be any significant change."

Opinion polls indicate this Saturday's election may be Australia's closest in decades, and both sides are focusing their campaigns on a handful of districts held by small margins. The comments by Ms Gillard and Mr Abbott are likely to influence some voters.

Ms Gillard's party wants to replace the governor general with a president. Parliament would retain its power to rule, with the president a largely symbolic figure. During national debates in the 1990s, the issue divided Australians.

Replacing the monarchy with a president elected by parliament was voted down in a 1999 referendum.

Some critics accused then-prime minister John Howard, a staunch monarchist, of ensuring victory for the "no" side by including the method of the president's election in the question.Many republicans wanted the president chosen by popular vote instead of by parliament.

Much of the election debate has centred on immigration, climate change, a Labour-proposed mining tax and most centrally, the general economy.

Australia has fared much better than developed countries in the West during the financial crisis, mainly because of the huge boom it has experienced in exporting raw materials to a rapidly growing China.

That issue also surfaced yesterday, with Mr Abbott attempting to allay the fears of some of his party over Chinese ownership of Australian companies involved in resource extraction.

Some opposition politicians have raised concerns that the surge in Chinese investment in Australia's mining industry over the three years that Labour has been in power will lower prices paid by Chinese manufacturers for Australian raw materials such as iron ore and coal.

"I would be very careful about majority ownership of Australian assets by government-controlled entities - and I'm not singling out China here I hasten to add," Mr Abbott said.

"I don't particularly want to see nationalisation of businesses by Australia let alone nationalisation of Australian businesses by other countries' governments or by entities controlled by other countries' governments," he said.

Investments by backed by foreign government money have to be assessed by Australia's Foreign Investment Review Board which determines whether they are in Australian interests.

The government has the final say on whether such investments are allowed.