Costello won't contest the Liberal Party leadership.

Turnbull will though. Costello knew the only way he would ever be PM was if he inherited it from Howard. He knew would never win an election as leader, much like Beazley.

OUTGOING treasurer Peter Costello says he will step back from politics following last night's election loss and will not stand for the leadership or deputy leadership of the Liberal Party.

Mr Costello said he had decided not to stand for the position of Opposition leader, but would continue to serve as the member for the Melbourne seat of Higgins.

"I've discussed this with my family and my wife Tanya, who is here with me today, and we have decided that in fact the time has come for me to open a new chapter in my life,'' Mr Costello said.

From news.com.au