Mr Howard said parents were moving their children out of the state system because of the lack of traditional values. They are choosing instead "values-neutral" private schools, which are mainly run by the churches. The prime minister claimed state-school teachers had an "incredibly antiseptic view about a whole range of things".
"Some schools think you offend people by having nativity plays," Mr Howard said. "I think that it's a reflection of the extent to which political correctness has overtaken this country."
His comments marked the start of an election year in which the government is expected to inject billions of dollars more into private schools. The opposition Labor party has promised to strengthen the public system if it wins power and will change the way money is allocated.
Over the past five years the number of students attending private schools has increased more than 20 per cent, compared with a 1 per cent rise in state-school enrolments. Federal grants to private schools have more than doubled since the government was elected in 1996. This year the schools will receive A$4.7 billion - more than the government spends on the entire higher education system.
State-school teachers bitterly criticised Mr Howard's remarks, claiming they were intended to distract attention away from reports that thousands of school-leavers had failed to be offered a university place this year.
Critics pointed out that a study commissioned by the government itself found that state schools were good at teaching values. The study said that schools in both systems promoted values such as tolerance and understanding, and social justice and respect for others.