SYDNEY (AFP) -- Australia's earnings from commodity exports are set to reach record levels in 2007/08 as strong demand from China underpins prices on world markets, the government's official forecaster said Tuesday.

The Australian Bureau of Agricultural and Resource Economics (Abare) predicted in its quarterly commodities report that commodity export earnings would rise seven percent to a record 148 billion dollars (114 billion U.S.).

The bureau estimated the commodities boom would help Australia's economy grow 3.75 percent in the year to June 2008, up from its 2.5 percent estimate for the current financial year to June 2007.

It said the bulk of the earnings would come from minerals and energy exports, rising eight percent to 116 billion dollars in 2007/08.

ABARE said Australia's worst drought for a century was expected to end in the first half of 2007, allowing rural exports to grow 3.4 percent to 27.2 billion in 2007/08.

"The growth in export earnings forecast for 2007/08 mainly reflects increased shipments of iron ore, coal, liquefied natural gas (LNG), copper, grains and oilseeds in response to strong demand in overseas markets," ABARE director Phillip Glyde.

Abare said significant new additions to Australia's mine, rail and port infrastructure would help boost export capacity by 2011/12.

It estimated iron ore production would rise by 177 million tons, or nine percent a year, to 441 million tons in 2011/12.

Copper production was projected to increase seven percent a year to 1.35 million tons in 2011-12, with metallurgical coal production up 19.4 percent to 159 million tons.

ABARE said the rises would largely be driven by Chinese demand for raw materials.

"With rapid industrialization and relocation of manufacturing to China from developed countries, the importance of China in world commodity markets can be expected to continue to increase in the foreseeable future," it said.