Peter Costello’s departure from the Liberal front-bench underlines what an extraordinary political figure John Howard has been. Costello always claimed that he had the interests of the Liberal Party at heart when he didn’t force the issue over the leadership. But the party needed him more than ever after Saturday’s drubbing. Whatever Howard’s failings, giving up wasn’t one of them.

The fact that opposition leaders who take the party leadership from a defeated prime minister never make it to the top job won’t stop some ambitious Liberals putting up their hand this week. Malcolm Turnbull is the pick of the bunch. Whoever ends up in the leadership will have a difficult time. The defining characteristic of the Howard Government was discipline. Howard was determined to avoid the experience of the Fraser Government, some of whose members crossed the floor on a regular basis. Even as marginal seat holders fell into Channel Nine’s shredder on Saturday night, they had nothing but praise for Howard. Idiots.

We can expect the release of some pent-up dissent from the left and right of the party. The moderates believe Howard was too conservative on social policy. The right would have preferred lower taxation and spending. Still, policy debate is harmless enough until it is harnessed by leadership rivals.

More interesting will be some repositioning on the part of those who were happy for 11 years to follow in John Howard’s foot-steps. The likes of Helen Coonan and Julie Bishop will be looking for leadership positions by playing to the themes of generational change and new ideas.

Contrary to popular myth, the moderate wing of the party is in reasonable health. Howard intervened in the Senate pre-selection to stop the right ending the career of the most moderate Liberal senator, Marise Payne. Gary Humphries survived in his ACT Senate seat by railing against Rudd’s “razor gang” rhetoric.

Where were the moderates, though, when WorkChoices was being drafted? It was WorkChoices that ruined the Coalition’s fourth term. While there was some debate about the details of the legislation, the broad direction of labour market deregulation is not contested inside the party. This is a far cry from the 1980s when wets such as Ian Macphee resisted the free-market agenda. These days, the right and left of the party are divided primarily on social and cultural issues.

It is difficult to see in Saturday’s loss the seeds of the divisions that plagued the Liberals throughout the 1980s. The party needs to cop the electorate’s message about industrial relations and climate change without trashing the legacy of a successful government. One problem is that there is in the party a consensus only over economic policies that have never been popular. The key question will be whether Howard’s social conservatism was an artefact of his leadership or of deeper trends within the party.

The issue on which Malcolm Turnbull differentiated himself from government policy prior to entering cabinet was tax reform – a repudiation of Costello more than Howard. Whether he is leader or shadow treasurer, Turnbull will be full of ideas in this parliamentary term. He needs to avoid making his ambition a point of contention inside his party.

Rudd will be determined to occupy the middle ground. There will be little to be gained in trying to outflank him on the right. While Rudd will benefit from decades of bipartisan reform of the economy, he will work hard to make sure that he sets the political agenda in ways that will make life difficult for the Liberal Party by hammering issues such as climate change.

The conservative parties should avoid being side-tracked by organisational matters. A merger between the coalition parties or moves to clean up the Liberal Party organisation in New South Wales will not make the party more relevant to voters. Only the performance of a strong and united parliamentary team will do that.