John Howard says the defection of Julian McGauran is a sensitive issue for the Nationals. (File photo) (Insiders)
Prime Minister John Howard says the Liberals did not poach Victorian senator Julian McGauran but he can understand anger within the Nationals over the defection.
Mr Howard is in the middle of deciding his new frontbench and has told Southern Cross Radio that Senator McGauran will not be on it.
"I won't be considering him for a ministry," he said.
Mr Howard says he is confident the Liberal Party did not poach the Senator.
"I understand the feelings of the National Party about this - it's a sensitive issue for them," he said.
Nationals leader Mark Vaile is still angry with his wayward Senator but says the Coalition will not split over the issue.
"We are absolutely committed to the stability and the cohesion that we have had in this Government over the last 10 years," he said.
Mr Vaile says he is still in discussions with Mr Howard over the shape of the new ministry.
Meanwhile, Federal Opposition Leader Kim Beazley has accused Treasurer Peter Costello of losing sight of his job by encouraging the defection of National party Senator Julian McGauran to the Liberals.
Mr Costello says he was not involved, but Mr Beazley claims it was the Treasurer who persuaded Senator McGauran to make the move.
Mr Beazley says Mr Costello should be focussing on fixing the tax system.
"You've got all sorts of folk ... saying there needs to be tax reform, there needs to be reform of the tax system in relation to superannuation," he said.
"What is the Treasurer of this nation doing - recruiting dysfunctional National Party backbenchers for the Liberal Party and the Coalition. This is what I mean about a test being obsessed about self."
Australian National Party senator Julian McGauran left the party in order to join the Australian Liberal Party. McGauran has made comments to the effect of stating that the Liberals have the best chance of representing regional Australia.

The Prime Minister John Howard has said that McGauran was not "poached", over suspicions in relation to an upcoming frontbench reshuffle, and the Federal Treasurer Peter Costello welcomed McGauran's defection, with suspicion he may have orchestrated the move in order to bolster his leadership prospects. 

Many Nationals felt hurt; Victorian Nationals leader Peter Ryan called his move the "ultimate act of treachery".

His House of Representatives brother Peter McGauran remains in the National Party.