Mr Habib has always claimed he was innocent

The US has announced Mr Habib is to be released from Guantanamo Bay where he has been a prisoner for three years.

Mr Habib, from Sydney, has claimed he was tortured for six months in Egypt before being sent to Cuba.

His release will add pressure on the US to free David Hicks, the only other Australian detainee in Camp Delta.

The Australian government always indicated that it was happy for the US to handle the cases of Mr Habib and Mr Hicks.

But Mr Habib's lawyer, Stephen Hopper, said his client's release proved that he was innocent, and said Mr Habib would consider seeking compensation from Australia and the US over his detention.

Mr Howard stressed on Wednesday, however: "We don't have any apology to offer."

He said he thought Mr Habib was not eligible for compensation because he had been legally detained.

Mr Habib, a 48-year-old taxi driver and father of four, is to be sent home without charge after the Australian government gave Washington unspecified "security assurances", the Pentagon said.

Mr Howard would not elaborate on those assurances.

'Security interest'

Australian Attorney General Philip Ruddock said it was unlikely Mr Habib would be arrested on his return but would remain a "security interest".

BBC's Phil Mercer in Sydney says that Mr Habib is likely to be closely monitored by Australia's intelligence services.

He was arrested while in Pakistan, three weeks after the 11 September terror attacks on the US.

In a court affidavit, Mr Habib claimed he was tortured in Egypt with beatings, electric shocks and was nearly drowned in late 2001 before being sent to Cuba.

Lawyer Stephen Hopper alleged the US had Mr Habib sent to Egypt in the knowledge that he would be tortured.

The US has denied prisoner abuse allegations and the state department has said it believes Guantanamo detainees were treated humanely.

The US alleged Mr Habib knew in advance of the 11 September attacks and had trained some of the hijackers in martial arts.

Mr Habib's lawyers claimed the confessions were obtained under coercion.

Mr Habib's wife Maha said: "They (the government) are really a disgrace (for) what they've done to my husband. My husband is an innocent person and he's a family man."

Amnesty International called on the government to investigate claims that Mr Habib and others, including Mr Hicks, were also tortured while in US custody.

Mr Hicks, 29, a Muslim convert dubbed the Australian Taleban, is due to face criminal charges by a US commission in March.