John Howard, Australia's conservative prime minister, has ended months of speculation that he may retire on his 64th birthday next month. Mr. Howard, who is riding a wave of popularity, says he will finish his third term in office.

John Howard is clearly enjoying the warm afterglow of a successful war in Iraq, where Australia was the third military force in the U.S.-led invasion. He has been received as an international statesman in the United States, has outlined tough policies on security and illegal immigration and has presided over a strong domestic economy and relatively low unemployment. Analysts say his decision to stay on comes as no real surprise. Opinion polls here suggest Mr. Howard represents the government's best chance of winning the next election, due any time in the next 18 months.

In a statement, the veteran conservative, who turns 64 at the end of next month, said he would always put his party first and he would be "honored" to continue as leader if that is in the best interest.

Mr. Howard became prime minister in 1996 and heads a right-wing coalition of Liberals and Nationals. He has a reputation as a skilled and ruthless politician.

His decision to stay on as leader is a blow to the man most likely to succeed him, Treasurer Peter Costello, who is 20 years younger than the prime minister.

Mr. Costello is clearly disappointed but has angrily deflected questions that he might one-day challenge Mr. Howard. "I will not have the opportunity at present to step up and take that role. Well, it wasn't my happiest day, put it that way. ... Someone with a track record of loyalty to the party that I've shown doesn't have to answer questions like that," he said.

John Howard has yet to say how long he intends to remain as Liberal Party leader.

Opposition politicians claim his decision to stay on is bad news for Australia. The leader of the Greens, Bob Brown, said Mr. Howard would continue to divide Australians over key issues.

The latest opinion polls suggest Mr. Howard would easily win another term at a general election. His approval rating has soared to 65 percent, compared to 17 percent for his main rival, the Labor opposition leader, Simon Crean.