Howard, who is on a three-day visit to Pakistan, stated this after meeting his Pakistani counterpart Shaukat Aziz in Islamabad.
He told reporters that he was encouraged by efforts made by the Indian and Pakistani leadership to resolve the Kashmir issue, despite "historical difficulties".
"The contribution they are making as men of goodwill and men of peace to bring about resolution (of Kashmir) is encouraging," Howard said.
Howard, who is the second Australian Prime Minister to visit Pakistan in nearly 16 years, appreciated Pakistan's role in fighting international terrorism.
The Australian Prime Minister, who also met President Pervez Musharraf, said, "We admire very much Pakistan's firm stand in the war against international terror and the personal risks the President has taken."
Musharraf described the talks as "excellent" and said their discussions focussed on bolstering bilateral ties in all fields and international issues of common concern, including counter-terrorism.
He briefed Howard about Pakistan's relief and reconstruction efforts in the quake zone and expressed gratitude for all the assistance Australia has extended in the wake of the October 8 earthquake. "They (Australia) sent a medical team to a difficult quake-hit area," Musharraf said.
Coinciding with Howard's visit, Pakistan and Australia signed six agreements and MoUs that included cooperation in areas of agriculture and combating trans-national crimes.