Houllier said: "It was disappointing we didn't kill Portsmouth off last week but the performance was entertaining. I believe we are getting there now.
"We were getting close to our best before we lost Jamie Carragher, Milan Baros and Michael Owen and now I think we are on our way back there again.
"Despite the injuries we have suffered we are fourth in the league and competing in two cup competitions. We have lost just once in our last twelve matches. That shows we are regaining our consistency and we are developing.
"The positive thing about the injuries is that those players look fresh now and I think we are getting closer to a good level again."
A disappointing campaign has also led to unrest within the Liverpool crowd, but Houllier is sure his side still retain the support of the majority of Reds fans.
Houllier added: "I believe the fans are on our side - there are tremendous expectations and high standards here and we are aware of that.
"But I feel the majority of supporters understand our problems this season with so many players out for long spells.
"Not many clubs could have coped with what we have, and the fans have helped us through the bad times."