Mr Howard said today everybody knew that Iraq had not gone as well as all had hoped and the issue now was what Australia should do.
His remarks came after a published interview with a Liberal senator saying coalition forces might never be able to stabilise the country and could be exacerbating internal tensions.
Mr Howard said Senator Russell Trood, in his remarks to the Bulletin magazine, was not advocating the Labor course of withdrawing Australian troops.
He said Australia should take the advice Iraq's deputy prime minister Barham Saleh who predicted chaos and much greater bloodshed if international forces were to abandon Iraq.
"It's not easy, these things are never easy, but we have to ask ourselves is Australia's security enhanced by western defeat in Iraq," Mr Howard told the Nine Network.
"I ask people to contemplate the impact on the authority of the United State, the impact on the west of a defeat in Iraq.
"If people think that is going to strengthen the west, is going to strengthen America and strengthen Australia, I think they have taken leave of their senses."
Mr Howard said the US was not about to pull out of Iraq.
"America will only leave Iraq when she is satisfied that the Iraqis can look after the situation themselves and that is our position," he said.
"People have to face the choice. The consequence of the Labor policy is defeat for the west, unless of course we are going to maintain the hypocritical position: `well it's not good enough for us to be there but we will leave it to somebody else'.
"That would do great long-term damage to our alliance."
In his interview with the Bulletin, Senator Trood, a foreign policy specialist before entering parliament, said Australia seemed to be doing very well in the southern provinces.
"But the overall direction of events is troubling and on present indications it is likely that a handover to the Iraqis will be slower than all might hope," he said.
Treasurer Peter Costello said Senator Trood had much experience in foreign affairs but he was saying the long term aim was to stabilise Iraq and have the Iraqis managing a democratic country.
"But what is the best way to ensure that Iraq is stable safe and democratic?" Mr Costello said on ABC radio.
He said the best way was to do what was now being done, including training of Iraqi forces.
He didn't believe Syria or Iran could help in Iraq.
"In fact Syria and Iran have been forces for destabilisation and unfortunately Iraq doesn't get much assistance from its neighbours," Mr Costello added.