Peter Costello to quit on October 19

Going, going, gone. Some within the Liberal Party never really believed Peter Costello was going to quit federal politics but now it's a done deal.

Mr Costello - Australia's longest-serving treasurer, who introduced the GST - will finally resign in just over a week.

Mr Costello took his bat and ball and retired to the back bench after the coalition lost the 2007 election.

He was furious that former prime minister John Howard hadn't stepped aside for him as promised.

What followed was more than a year of damaging speculation about the Liberal leadership, with supporters and the media playing a game of "Will he, won't he?".

In June this year Mr Costello declared he wouldn't recontest the seat of Higgins at the next federal election, due in late 2009.

But some hoped he still might change his mind, even after Kelly O'Dwyer was preselected by the Liberal Party to run in his Victorian seat.

On Wednesday, however, Mr Costello announced he'd resign on Monday week when parliament resumes.

The timing might not suit Opposition Leader Malcolm Turnbull - who's struggling to win over his own party let alone Australian voters - but Mr Costello insists he's acting in the best interests of the party.

It's the same line he used to justify his decision never to challenge Mr Howard.

"The cleanest thing to do is have the by-election this year," Mr Costello said on Wednesday.

"We've now got our candidate, we're ready to go, we're ready for the by-election."

The Higgins by-election will most likely be held on the same day in November as the contest for Bradfield in NSW, the seat vacated by former opposition leader Brendan Nelson.

Mr Costello says Ms O'Dwyer - his former staffer - will be part of the renewal that the Liberal Party now needs to undertake.

"Successful organisations plan for succession and engage in renewal," he said.

The remark was a veiled swipe at the party he believes failed to renew itself by installing him as prime minister.

It would have been better for everyone if he'd been handed the reins, Mr Costello said.

"It would have been better for me. Obviously it would have been better for John Howard - he lost his seat," he said.

"I also think it would have been better for the country if we had been re-elected."

Mr Costello says he's looking to move into the private sector.

But he'll continue his work on the international advisory board of the World Bank, as part of his commitment to "making the world a better place and serving my fellow men and women".

There's also the possibility of a government posting - floated by Kevin Rudd earlier this year.

"There certainly has been no offers from the government," Treasurer Wayne Swan said on Wednesday.

"But I think the prime minister has made it very clear that where there are talents and distinguished Australians and they are available, we are certainly interested in using them."

Indeed, Dr Nelson has been appointed Australia's ambassador to Europe.

Mr Howard on Wednesday praised Mr Costello for serving as deputy Liberal leader for 13 years "with much distinction and success".

"In government Peter and I worked together in close professional harmony," the former PM said.

"I thank him for that."

Mr Rudd praised Mr Costello as "one of the most colourful performers in parliament" during his 20 years in Canberra.

"Such were his talents that, even for those of us on the receiving end of one of his barbs, it was hard not to laugh, even as you winced in pain," the prime minister said in a statement.

"To have been treasurer of the commonwealth for almost 12 years is a further credit to Mr Costello's talents and abilities."

The PM also acknowledged the former treasurer's "significant role" is helping to set up the G20 following the Asian financial crisis of the late 1990s.