Competition between cell groups alleged

SYDNEY -- Two Islamic terrorist cells were competing to become the first to stage a major bombing in Australia, a prosecutor said yesterday after police arrested 17 suspects in a series of coordinated pre-dawn raids in two cities.

About 500 police arrested nine men in the southern city of Melbourne and eight in Sydney, including one man critically injured in a gunfight with police.

Police said they expected more arrests in coming days and weeks. Federal police raided another Sydney home last night, but no arrests were reported.

''Thankfully, the police forces of this country might just have prevented a catastrophic act of terrorism . . . either in Melbourne or in Sydney," said New South Wales state Police Minister Carl Scully.

One of the suspects, Abdulla Merhi, wanted to carry out attacks to avenge the war in Iraq, police said in a Melbourne court. Prime Minister John Howard was a strong supporter of the US-led invasion of Iraq and has hundreds of troops in the country.

Norm Hazzard, who heads the state's counterterrorism police unit, said the suspects were followers of Al Qaeda leader Osama bin Laden.

''I think you can go back to Osama bin Laden and those who follow his philosophy -- that is what terrorism in its modern form is all about and there's no doubt that this group followed that same philosophy," he said.

The raids came less than a week after Howard strengthened counterterrorism laws after saying intelligence agencies had warned of a possible terrorist attack. He went on national TV to say the risk was not over, despite the arrests.

''This country has never been immune from a possible terrorist attack," he said. ''That remains the situation today and it will be the situation tomorrow."

Defense lawyer Adam Houda told reporters the Sydney suspects were innocent.

''There's no evidence that terrorism was contemplated or being planned by any particular person at any particular time or at any particular place," he said.

Howard's opponents say Australia's support of the war in Iraq has raised the likelihood of terrorists striking Australia.

''We have . . . drawn ourselves to the attention of people who would commit terrorist acts against this country," said Kim Beazley, leader of the opposition Labor Party.

Police said the alleged plotters apparently had not settled on a target.

Both cells were led by one of the detainees, 45-year-old firebrand cleric Abu Bakr, an Australian who was born in Algeria, a prosecutor said.

Bakr made headlines earlier this year by calling bin Laden a ''good man."

The suspects were stockpiling the same kind of chemicals used in the deadly July 7 transit bombings in London, prosecutor Richard Maidment told Melbourne Magistrates Court at a hearing for the nine people arrested there.

''Each of the members of the group are committed to the cause of violent jihad," he added.