The ACNielsen poll found that despite a positive response to the government's big-spending budget two weeks ago, support for Howard's eight-year-old coalition had slipped to 39% from 42% a month ago.
In contrast, centre-left Labour was in its best electoral position in about three years, with support up one point to 43% and new leader Mark Latham was enjoying a higher personal approval rating than Howard at 58 to 52%.
Political rivals said the government was being damaged by a backlash against the Iraq war, as 63% of voters now believe the US-led Iraq invasion was unjustified, up from 51% last September.
Howard, a close US ally, contribued 2000 military personnel to the war and the future of the 850 Australian troops still on duty in and around Iraq has become a political tug-of-war with Latham vowing to bring them home by Christmas if he wins power.
Labour spokesman Wayne Swan said the poll showed a swing against the Iraq war, following photographs showing US troops abusing Iraqi prisoners and an escalation in violence there.
"It's certainly clear that Australians believe John Howard misled them on Iraq," Swan told reporters.
Howard, 64, only just managed to keep his lead as preferred prime minister in the ACNielsen poll, with 47% of 1409 respondents nominating him as preferred national leader while 43% opted for 43-year-old Latham.
The prime minister repeatedly comes out as the preferred manager of the nation's economy which has recorded more than a decade of growth despite turbulence in the global economy.
Howard, who is going to the United States next week to visit close ally President George Bush, is expected to call an election within months, with 7 August shaping up as the earliest possible date, but late October tipped as most likely.