UPDATE 1-Australia's Woolworths Q3 sales meet market f'casts

* Woolworths third quarter sales up 6.5 percent

* Expects full-year sales to grow in upper single-digits

* Shares rise as much as 4.4 pct (Adds details)

SYDNEY, April 17 (Reuters) - Woolworths Ltd (WOW.AX), Australia's top supermarket chain, reported a 6.5 percent rise in third-quarter sales, meeting analysts forecasts, and flagged upper single digit sales growth in full year.

Sales were boosted by strong growth in demand at its food and liquor divisions and helped lift Woolworths shares as much as 4.4 percent, outpacing a 1.7 percent rise in the benchmark S&P/ASX 200 index .AXJO.

Shares in other retailers, such as Wesfarmers Ltd (WES.AX), Harvey Norman Holdings Ltd (HVN.AX), also climbed on the back of Woolworths' robust sales.

Woolworths, which accounts for about 35 percent of Australia's food and liquor retailing, said third-quarter sales totalled A$12.3 billion ($8.8 billion), up from A$11.58 billion a year ago.

Four analysts on average had projected Woolworths' sales to rise 6.4 percent in the third quarter.

Woolworths has stayed away from making acquisitions, despite sharp falls in the value of listed companies amid the global financial crisis, and instead ploughed back profits into refurbishing its stores.

"This result reflects the continued positive response from our customers to these reinvestment strategies," Woolworths' Chief Executive Officer Michael Luscombe said in a statement.

Sales growth at Woolworths, which also owns Big W discount stores and the Dick Smith electronics chains, comes as the government fights hard to avert a recession, partly through cash hand outs to consumers.

The government has already announced two stimulus packages amounting to some A$52 billion and analysts say retailers such as Woolworths are benefitting from the hand outs.

Woolworths, which is also a petrol retailer, had been negatively impacted by an estimated 15 percent fall in fuel prices from a year ago. Sales excluding petrol climbed 9 percent seasonally adjusted, the company said.

Woolworths shares were up 3.8 percent at A$26.56 by 0051 GMT, but are trading flat on the year, lagging a 2.1 percent rise in the benchmark index. ($1=A$1.39) (Reporting by Denny Thomas; Editing by James Thornhill)