Queen gives surprise blessing to Australian republic

In a gracious and candid speech that disarmed republicans, the Queen yesterday made clear that she expects Australia to dispense with her services as head of state in the next few years, and effectively gave the move her blessing.

The Queen spoke at a lunch in Sydney after receiving a ceremonial welcome in front of the Opera House, where a 21-gun salute rang out over the city's famous harbour. Some 3,000 people turned out to greet her on the first major engagement of her Australian tour, huddling under umbrellas in driving rain.

The state lunch at the Darling Harbour Convention Centre was preceded by a security scare; a man with an 8in kitchen knife strapped to his leg was arrested outside the building after trying to breach the security cordon. An early report that he was also carrying home-made explosives was later retracted by police.

The Queen said she had followed "with the closest interest" the debate before last November's constitutional referendum, in which Australians - largely as a result of a split in republican ranks - voted narrowly to retain links with the British Crown. She said it was for the Australian people alone to decide the future of the monarchy in Australia, adding: "I respect and accept the outcome of the referendum."

The Queen recalled her links with the country over the past half century, but added: "We must look forward as well as back. Australia has always been a country on the move and will go on being so - it is not for nothing that the anthem is 'Advance Australia Fair' ...

"Whatever the future may bring, my lasting respect and deep affection for Australia and Australians everywhere will remain as strong as ever.That is what I have comehere to say."

Republican campaigners, who have always insisted that they are opposed to the institution of the monarchy and not to the Queen herself, were taken aback. Malcolm Turnbull, chairman of the Australian Republican Movement, said she had "gone further than diplomacy would have required her to do". "I think she, in some respects, is expecting her speech to be interpreted as saying to Australians 'come on, get on with it'."

The subject of republicanism, which seems certain to overshadow the Queen's 13th tour of Australia, was also tackled head-on by her lunch hosts, the monarchist Prime Minister, John Howard, and two noted republicans, the Opposition leader, Kim Beazley, who has pledged to hold another referendum if he comes to power, and the premier of New South Wales, Bob Carr.

Mr Howard told the Queen that the "vigorous" debate had "not in any sense been about you as a person", adding: "I know that you will be very,very warmly received by all Australians."

In the incident outside the Convention Centre, police challenged and searched Gregory Pailthorpe, 39, from south-west Sydney, who had claimed to be part of the Queen's protection team. Pailthorpe, who has a history of mental illness, later pleaded guilty to unlawful possession of a knife in a public place and was remanded in custody for psychiatric reports.

The arrest was made by Detective Inspector Terry Dalton, of Sydney police, by coincidence the same officer who arrested Michael Kang, a Cambodian student who fired blanks from a starting pistol at the Prince of Wales during a visit to Australia in 1994.

At the Opera House, the only sign of protest was a banner, unfurled by five people, that read "British troops out of Ireland". Police persuaded them to take it down.