The prime minister is facing off against the coalition leader at the ABC's western Sydney studios for the second out of four clashes before the May 3 election.
In the showdown moderated by the ABC's David Speers, Mr Dutton opened by urging voters to reflect on the past three years when they go to the ballot box in a few weeks.
"It's obvious to me that people don't feel better off," he said on Wednesday night.
The prime minister quickly followed up with a message of hope.
"I'm really optimistic about Australia's future if we seize the opportunities that are right in front of us," Mr Albanese said.
Halfway through the campaign, Labor is in poll position to form government according to new polling conducted by Freshwater Strategy for the Australian Financial Review.
This survey has has favoured the coalition compared with other pollsters and the latest 50-50 two-party-preferred result - alongside other polling data - indicates a swing in Labor's favour.
Outside the ABC studios, about 100 pro-Palestine protesters gathered to protest the major parties' responses to Israel's violence in Gaza.
The first leaders' debate, hosted by Sky News and the Daily Telegraph, ended in a narrow victory for Mr Albanese after 44 per cent of the undecided voters in attendance deemed the prime minister the winner.
But 21 per cent remained unsure, indicating there is still room for Mr Dutton to make a come back.
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