The Australian economy is currently riding high on a boom driven by China's seemingly insatiable demand for natural resources to fuel its surging growth.
Beijing regularly expresses anger over the Dalai Lama's contacts with foreign governments and last month made clear its distaste for any meeting with Australian politicians.
"We hope that relevant governments and parties can stay on high alert to the actions and words of the Dalai Lama aimed at splitting China and do not give support to the Dalai clique," foreign ministry spokeswoman Jiang Yu told reporters ahead of the visit.
Howard and Kevin Rudd, leader of the opposition Labour Party, initially said they would not meet the Dalai Lama during his 10-day visit to Australia, which began last week.
But following accusations of kowtowing to China, they both said they would check their diaries to see whether they had time to meet him.
Rudd, a Putonghua-speaking former diplomat in China, soon after announced that he would meet the Dalai Lama.
But until Tuesday officials in Howard's office were said to be still "checking his diary."
Shortly before Tuesday's announcement, the leader of the Australian Green Party said the decision about whether to meet the Tibetan had to do with "money, greed and trade."
"There's something despicable about our political leaders at state and federal levels ... kowtowing to the dictatorship in Beijing over trade," said Senator Bob Brown.