Australian PM moves to quell leadership tensions

CANBERRA, Aug 15 (Reuters) Australian Prime Minister John Howard and his ambitious Treasurer Peter Costello moved to publicly quell new leadership tensions today as the government battles to build support ahead of elections.

Howard said he trusted Costello and would continue to work with him after the Treasurer was reported as promising in mid-2005 to destroy Howard's leadership, telling three senior journalists that Howard could not win another election.

Costello confirmed he attended an off-the record dinner with three journalists in mid-2005, but he strongly denied he made any comments against Howard or threatened to undermine the Prime Minister's leadership of the ruling Liberal Party.

''John Howard can win the next election. And John Howard will win the next election,'' Costello told parliament.

Costello has long been Howard's heir-apparent, but his hopes of taking over as prime minister were crushed in July 2006 when Howard announced he would continue to lead the Liberal Party to try to win a fifth consecutive election.

The new leadership revelations came as the latest Reuters poll analysis found the government clawing back voter support, although Howard's conservatives still trail the centre-left Labor Party with an election due by the end of the year.

After 11 years in office, Howard's government trails Labor by 9.8 points in August, the Reuters Poll Trend found. Government support was 45.1 per cent compared to 54.9 per cent for Labor.

The result is Howard's best since Labor elected Kevin Rudd as its leader in December 2006, and shows Howard has gradually reduced Labor's poll lead since mid-March, when the government trailed by 19.2 points.

Reports of Costello's 2005 dinner received widespread coverage in the Australian media today, with the three journalists standing by their version of Costello's comments.

One of the reporters, Michael Brissenden from the government-funded Australian Broadcasting Corporation, produced notes to back his version of the dinner.

The three journalists said they went public to defend their honesty, and said the comments were originally on background, although Costello's office later asked they be kept secret.

Costello and Howard dismissed the row, with Howard telling reporters there was nothing wrong with Costello having ambitions to one day become prime minister, and promising the two could continue to work effectively.

''Mr Costello and I have a wonderful, harmonious, professional relationship,'' Howard told reporters. ''And I can tell all of you that Mr Costello and I will continue to work together in very close professional harmony.'' REUTERS SLD PM1540