The prime minister won the contest on Tuesday evening, after a group of 100 undecided voters cast their ballot at a "people's forum" hosted by Sky News and The Daily Telegraph.
Forty-four per cent of the group voted in favour of Mr Albanese, with 35 per cent for the opposition leader, and 21 per cent still undecided.
Polling has shown the race to reach majority government is tight.
Both leaders were cautious in their responses and avoided any major gaffes at the event in western Sydney.
Education, rising healthcare costs, and energy bill relief were among the issues asked by the voters.
About half the room of participants raised their hands when asked if they were struggling with cost of living, which is the defining issue of this election.
Mr Dutton was repeatedly asked about his rhetoric on migration, as audience members asked what he could do to avoid "demonising" them.
"We have to have a managed migration program and our argument is that you can reduce it from the record level of at the moment, down by 25 per cent for two years, which will create about 100,000 homes and that will help young Australians get into housing," he said.
Answering a question about health, Mr Albanese pulled out a Medicare card - something he has done repeatedly during the campaign - as Labor places the issue at the forefront of its re-election bid.
"Labor created Medicare will strengthen Medicare, and will make sure that in the future we get those bulk billing rates back up to 90 per cent," he said.
Mr Dutton vowed there would be no cuts to healthcare if the coalition is elected, and rebutted Labor's claims about his record.
Both leaders were asked how they would react to US President Donald Trump after he imposed tariffs on every country.
Nationals Senator Matt Canavan sent his "thoughts and prayers" to Mr Dutton, after the leader's father Bruce was rushed to hospital just hours before the debate started.
Western Sydney is a key battleground for the two major parties.
But Labor also faces new challenges from independent candidates from the city's Muslim communities who feel angry and let down by the position taken by the government on the Israel-Gaza war.
Both were asked about their response to the conflict during the debate.
Mr Dutton has pledged a 25 cents a litre cut to the price of petrol by halving the fuel excise for 12 months if the coalition is elected.
Asked why he wouldn't commit to the promised cuts to the fuel excise, Mr Albanese said it would "disappear in a year like the last time it happened".
"This is from the Scott Morrison playbook," he said.
Modelling conducted by Frontier Economics has found the coalition's national gas plan will see a 23 per cent reduction in wholesale gas prices.
This would result in a seven per cent reduction in retail gas bills for residential customers, and three per cent reduction in residential electricity prices.
