Australia welcomed the surprise release from prison of former deputy prime minister Anwar Ibrahim, saying it had been watching his fate "closely and with interest".

"I welcome the decision brought down today by Malaysia's Federal Court - the country's highest court - allowing the appeal by former Malaysian Deputy Prime Minister Anwar Ibrahim against his conviction and sentence for sodomy," Foreign Minister Alexander Downer said.

"The Australian government has been watching closely and with interest Mr Anwar's case," he said in a brief statement.

Anwar was sacked in September 1998 by the country's long-serving prime minister, Mahathir Mohamad.

His sacking sparked street protests by thousands of his supporters and Anwar was jailed shortly afterwards on corruption and sodomy charges, which he said were trumped up to prevent him mounting a political challenge to Mahathir.

Mahathir had been a frequent critic of Australia, lambasting its treatment of asylum-seekers and its perceived role as a "deputy sheriff" for the United States in the Asia-Pacific. He retired last October.

Justice done

Meanwhile New Zealand Foreign Minister Phil Goff said in a statement he hoped Anwar, who needs medical attention for a back injury, "will make a full recovery and be able to enjoy life as a normal citizen again".

"Justice has finally been done following today's decision by the Malaysian Federal Court to quash the conviction against former deputy prime minister Anwar Ibrahim," Goff said.

"Anwar's trial attracted widespread public interest in New Zealand and at the time I conveyed to the Malaysian government our concerns over the adequacy and fairness of the judicial process followed in this case."

The process had been "flawed and partial" and Thursday's decision upheld that, he said.

Goof also commended statement by Malaysia's Prime Minister Abdullah Badawi that the government would not interfere in decisions of the court.