Cabinet minister Craig Emerson believes Labor will be competitive in the September 14 federal election.
That's despite Labor languishing in recent opinion polls, with the latest Newspoll in The Australian on Tuesday showing its primary vote at 31 per cent compared with the coalition's 47 per cent.
After preferences the coalition leads by 12 points.
It also shows Opposition Leader Tony Abbott overtaking Julia Gillard as preferred prime minister for the first time in a Newspoll since July.
Dr Emerson says there is a clear choice for voters between a government that has a plan for Australia to strengthen an already improving economy and an opposition that believes the economy needs radical surgery.
"We will be very competitive," he told ABC radio.
Independent senator Nick Xenophon said the poll confirmed many voters had already made their choice.
"This latest Newspoll isn't so much an opinion poll, it is a funeral notice," he told reporters in Canberra on Tuesday.
Senator Xenophon said the outlook for the government was "pretty grim".
"The voters haven't so much baseball bats behind their backs waiting for the election but some of them almost have a nuclear missile," he said.
Installing Kevin Rudd as Labor leader could make the difference between a Labor backbencher staying in parliament or being "turfed out".
"That will sharpen the mind of some in caucus," he said.
Australian Greens leader Christine Milne says Mr Abbott has had a hand in the government's poor standing with voters.
Mr Abbott had gone around the country making "wild claims" about carbon pricing from which he and shadow treasurer Joe Hockey were now backing away from.
Colleague Penny Wright said the poll reflected the community's disappointment with the government, especially over the mining tax.
Voters recognised that big miners were benefiting from the nation's resources and not paying their fair share back to the community.
"The government needs to fix that," Senator Wright said.
Senior Liberal George Brandis said the polls reflected long-standing concerns of voters.
He said it was only natural the opposition pursued a more positive image as the election drew closer.
"If the government continues to make catastrophic mistakes ... of course the opposition is going to criticise them," he told Sky News.
"It's not our fault that we're negative because the government gives us so much to criticise."