Australia refused to take the Tampa's human cargo
But he told parliament the "inadvertent breach" had been in the national interest and that all other intelligence operations had been legal.
Australian troops stormed the Norwegian freighter the Tampa last August to prevent more than 400 mainly Afghan asylum seekers from entering Australia.
The Tampa had rescued the migrants from a sinking Indonesian ship.
Accusations
Opposition parties have demanded an inquiry into allegations that the government used the phone-tapping for political advantage in the run-up to last November's general election.
Mr Howard's government won a third term in office in that election - a victory which was put down to its hardline immigration policies following the Tampa incident.
The Defence Signals Directorate, the military's intelligence gathering arm, is barred from passing the conversations of Australians to the government unless a crime or threat to national security is involved.
But Sydney's The Daily Telegraph newspaper reported on Tuesday that the DSD had provided the government with transcripts of calls made by trade unions, politicians and others. The newspaper said that information was used by the government to form a political response.
That response involved the SAS boarding the ship. Australia later sent the asylum seekers to New Zealand and to the tiny Pacific island nation of Nauru to have their claims processed.
The captain of the Norwegian freighter on Wednesday said he had suspected his telephone conversations were tapped.
Captain Arne Rinnan, who was awarded a medal by Norway for rescuing the mainly asylum seekers, told ABC radio he had heard clicks on his satellite telephone line and had complained to the SAS troops.
However he said he could not prove anything.