The Newspoll published on Monday showed 53 per cent of people expect the opposition to claim victory, either in its own right or in a minority, compared with 47 per cent who believe the government will win.
The coalition has boosted its standing with voters, with the opposition leading on a two-party preferred basis 51 per cent to 49 per cent, an increase of one percentage point compared with the previous poll.
The result is a 3.1 per cent swing against the government since the 2022 election. If repeated uniformly at the next poll, Prime Minister Anthony Albanese would be returned for a second term, but leading a minority government.
Despite the poll result, Labor MP Matt Thistlethwaite said the government remained confident of its electoral chances.
"What people are telling me is, yeah, times have been tough, but they understand that the government's doing all it can to try and help people get through this difficult period. They understand that it's been a tumultuous time," he told Sky News on Monday.
"I'm confident that Labor will win the next election, led by Anthony Albanese, because I think it becomes a contest of ideas."
The federal election is due to be held by May 17 at the latest.
Opposition Leader Peter Dutton is gaining ground on Prime Minister Anthony Albanese, polling says. (Diego Fedele/AAP PHOTOS)
The poll found Labor's primary vote has dipped two points to 31 per cent since December, while the coalition's vote has remained stable on 39 per cent.
Nationals MP Barnaby Joyce said the coalition would not be taking the poll outcome for granted, but did note the government had been losing support.
"I wouldn't say that we've won the election by a long shot, but I could say that there's real sentiment against Mr Albanese," he told Seven's Sunrise program.
"Cost of living has killed them, they haven't managed to get on top of that. They've been fascinated with intermittent power and other rubbish like that."
While the Australia Day holiday normally marks the unofficial start of the political year, both Mr Albanese and Opposition Leader Peter Dutton have been using most of January to tour the country in a pseudo election campaign.
The prime minister has already started his re-election pitch to voters over the summer break, dismissing his underdog status by saying he has been "underestimated my whole life".
He said he understood Australians were hurting and the cost of living was their number-one concern.
"What I'm confident of is that I lead a government that's focused, that's orderly, that has seen Australia through some very difficult economic times," he said on Sunday.
Polling suggests inflation and the squeeze on household finances were turning Australians off Labor despite its investments in relief measures.
Many are expected to vote for independents and minor parties, increasing the likelihood of a minority government.
Mr Albanese's approval ratings plummeted to the lowest level since he took the top job, the Newspoll showed.
Mr Dutton is closing the gap in the preferred PM stakes, trailing 41 per cent to Mr Albanese's 44.
The Newspoll of 1259 voters was conducted between January 20 and 24.
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