Pope Benedict's decree recognised a miracle attributed to Mother Mary MacKillop, who was briefly excommunicated in the 19th century.
Australians rejoiced and prayed on Sunday after Pope Benedict approved a decree clearing the way for a nun who worked with the poor more than 100 years ago to become the country's first Roman Catholic saint.
Pope Benedict's decree recognised a miracle attributed to Mother Mary MacKillop, who was briefly excommunicated in the 19th century but is now likely to be formally declared a saint at a canonisation ceremony next year.
"We have been waiting all these years and praying for it. We are just walking on air today," Claire Larkin, who helps run a centre dedicated to MacKillop in the small South Australian state town of Penola, told Reuters.
"We just can't believe it. We will have to pinch ourselves."
MacKillop founded an order dedicated to helping the poor in Penola in 1866 at the age of 24. Her followers there stayed up late into the night to hear the news from the Vatican.
Hundreds prayed and kissed her tomb on Sunday at a church in North Sydney, where she died in 1909, and a message was read from the country's top Catholic priest, Cardinal George Pell.
Pell said a formal decision on canonisation and a date for the ceremony were expected in early 2010. There are about 5 million Roman Catholics in Australia.
The miracle approved on Saturday, the second attributed to MacKillop, involved the healing of a person who had cancer and was cured after praying to her.
MacKillop was born to poor Scottish parents in Melbourne in 1842, a few years after the city was founded in southern Australia, the eldest of eight children.
After working for a time as a governess, she founded the order of the Sisters of Saint Joseph of the Sacred Heart with Father Julian Woods, a priest interested in improving Catholic education in what were then Britain's Australian colonies.
They opened their first school in a disused stable in Penola. MacKillop's work at times brought her into conflict with the Catholic hierarchy and she was excommunicated for five months between 1871 and 1872.
In 1885 she was removed from the leadership of the order she founded, but returned to lead it again in 1899.
"In a time when poverty was common and educational opportunities for young Australians very limited, Mary MacKillop worked to improve the lives of the marginalised, the homeless and the destitute throughout her life," deputy prime minister Julia Gillard said in a statement.
"Mary MacKillop's story is a great inspiration to all Australians," she said.
Today, MacKillop''s order still carries out charitable work in many parts of Australia, particularly poorer rural areas, as well countries including New Zealand, Ireland and Peru, working with prostitutes, drug addicts, Aboriginal communities and refugees.
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