CANBERRA (AAP): The Liberal leadership fight is at a stalemate, with John Howard and Peter Costello agreeing to an uneasy truce following a half-hour private meeting yesterday.
The two men hammered out their differences following yesterday cabinet meeting in Sydney, with Mr Costello again putting his leadership ambitions on hold to remain as treasurer.
The prime minister conceded that the squabbling over the past two days about whether he and Mr Costello had a deal about a leadership handover had been 'a bad look' for the government which would hurt it in the opinion polls.
But Mr Howard said he did not accept that the two men's professional relationship had broken down, despite acknowledging that his Liberal Party deputy wants him to step down before next year's election.
"Mr Costello obviously would like to see a leadership change in his favour before the election," Mr Howard said. "I have indicated to him, as I have always indicated, that in the end it is the will of the party and the interests of the party that is paramount.
"I think it is self-evident that Mr Costello would like to succeed me, I don't think there's any doubt about that."
The two men's 10-year working relationship hit its lowest point on Monday when Mr Costello accused the prime minister of reneging on a 1994 undertaking to step down midway through his second term to hand over to his deputy.
Mr Howard still maintains that no deal was struck between the two.
But he said he understood and respected Mr Costello's ambition, adding that he still had plenty of ambition himself.
"I don't think it is in any way ignoble or wrong of Mr Costello to aspire to the leadership of our party," he said.
Mr Howard refused to say whether he would contest the next election.
Asked whether the leadership was at a stalemate, Mr Howard said: "Well, no more or less than there ever is in a political party where somebody under the leader would like the leader to retire so he or she can take over."
He was adamant that no deal or understanding was reached at today's meeting about a retirement date.
Mr Costello was still his most likely successor should he fall under a bus, Mr Howard said, but added: "I am still very careful about crossing the road."
Earlier, Mr Costello refused to comment about his meeting with Mr Howard.