Sheikh Taj al-Din al-Hilali was quoted as making the remarks while on a visit to Lebanon, where he also held talks with the leader of Hizballah, Sheikh Hassan Nasrallah.
Hizballah pioneered the now-common practice of suicide bombings, with deadly attacks two decades ago against U.S. and French troops in Beirut.
The Australian parliament last year outlawed Hizballah's "External Security Organization," described by some researchers as the group's military wing.
Several Australian lawmakers are calling for Hilali's actions to be investigated, and the prime minister took issue with the cleric in parliament Thursday.
The cleric, who holds the title of "mufti of Australia and New Zealand," is an Egyptian who was granted permanent residence 14 years ago by a previous Labor government.
He met with Nasrallah in Beirut last Friday, according to the Lebanese newspaper Al-Safir .
The paper quoted Hilali as saying afterwards he had praised Hizballah for its recent achievement in getting Israel to release more than 400 prisoners in exchange for an Israeli businessman and the remains of three kidnapped Israeli soldiers.
But it was other comments, in speeches and interviews during his visit, that have caused a stir. The quotes from Arabic newspapers were translated by the Middle East Media Research Institute.
The al-Bayan newspaper in the United Arab Emirates quoted Hilali as praising the actions of the Palestinian terrorist groups, Hamas and Islamic Jihad.
"We support the resistance and support, with all our might, the martyrdom operations carried out by the Palestinian liberation movements - operations that are a legitimate act against the cruel occupation, according to all international norms and conventions."
"Also, whoever carries out a martyrdom [operation] is a pure shahid [martyr] and one of the men of paradise."
In a sermon in Sidon's Jerusalem Mosque, he is quoted as calling for jihad against Israel, saying that "the war waged by the U.S. and Israel against the Muslims is a cruel war aimed at annihilating the [Islamic] nation."
One report quotes him as praising Hizballah, saying it had "become a model for all the mujahideen [Islamic fighters] in the world."
"Most of the Australian people do not support the policy of the Australian government, which has placed Hizballah on the terror list out of submission to the U.S., and the Australian prime minister will pay the price for this in the next elections."
Banning Hizballah was one of a number of steps taken by the Australian government in response to the terrorist threat since 9/11 and the Oct. 2002 bombings in Bali.
At the time the ban was being discussed, lawmakers considered other countries' handling of Hizballah.
They noted that the entire organization is banned in the U.S. and Canada, while Britain specifically proscribed only the group's "External Security Organization" -- a decision seen as affording some legitimacy to other parts of Hizballah.
Australia followed the British example.
The legalities surrounding Hilali's meeting with Nasrallah and expression of support for Hizballah are therefore unclear.
A spokesman for Australian Attorney General Philip Ruddock said Thursday that Hilali's comments while in Lebanon "would seem to be inappropriate and perhaps his meeting was not prudent."
Whether the law had been breached, however, depended on exactly whom he had met and what he was involved in, and was a matter for the federal police to decide.
Asked about Nasrallah specifically, the spokesman said "I don't know enough of the structure of the organization personally to offer a view, but it's been suggested to me that he could be seen as the head of the political wing rather than directly associated with the External Security Organization." (see related story)
'Out of context'
Speaking in parliament Thursday, Prime Minister John Howard slammed the mufti's comments.
"If these remarks are correct or they are in substance correct, then I think what he has said deserves to be condemned in the strongest possible terms," he told lawmakers.
"Incitement to violence against the state of Israel is utterly unacceptable coming from the leader of any community in this country."
Christopher Pyne, a lawmaker from the ruling coalition, earlier urged the government to consider action against Hilali, saying the comments were the latest example of the cleric's "extremism which has no place in this country."
A Labor lawmaker, Michael Danby, was quoted as saying that "Hilali's presence in Australia is a mistake."
Hilali's spokesman in Sydney, Kaiser Trad, defended the cleric, saying he had spoken to the mufti by telephone and established that his comments had been taken "out of context."
Asked about the statements about suicide bombers, Trad told Australian radio: "He's not saying 'go ahead and do this.' He's saying 'let's not condemn them because these people are making a major sacrifice to protect their country.' "
"There's a big difference between saying 'let's not condemn them' and calling on people to do something like this," Trad said.
Hilali has been a controversial figure since he arrived in Australia on a short-term visa in the early 1980s and stayed.
Efforts later that decade to have him deported were stymied by political and religious supporters, and he gained permanent residency in 1990. He is now an Australian citizen.
Although Trad maintains that he is a "moderate" leader, critics have questioned his suitability as head of Australia's 282,000 Muslims, accusing him of "extremist" views about Jews, America and the Middle East political situation.
Hizballah Linked to Numerous Terrorist Attacks (Feb. 19, 2004)
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