Kevin Rudd has called an election for September 7, declaring himself the underdog in a poll that would offer voters a choice between his positivity and economic prowess and the Coalition's ''wall-to-wall negativity'' and ''three word slogans''.
Opposition Leader Tony Abbott responded by saying only his party could provide stability and unity, and laying down a bold early gambit that he would accept government only if the Coalition won a clear majority.
Kicking off his re-election bid two days after unveiling new taxes and a massive budget blow-out, Mr Rudd borrowed John Howard's successful 2004 approach of turning a weakness into a strength by asking voters whom they trusted on the economy.
He said voters would decide the election based on who was best equipped to manage a transition from the end of the China-fuelled boom, and who would deliver in a range of key policy areas vital to jobs and families, such as the national broadband network, disability care, and education.
''This election will be about who the Australian people trust to best lead them through the difficult new economic challenges which now lie ahead,'' he said.
''The new challenges facing our economy will require new ways of thinking, new ways of acting, new ways of planning.''
Labor's campaign will be based strongly on its economic record, with Mr Rudd reminding voters who was in charge when Australia avoided a recession through the global financial crisis.
Mr Abbott told voters they had watched politics for the past three years and ''seen the unity'' in the Coalition under his leadership, declaring ''I am ready''.
The Opposition Leader accused Labor of dishing up three years of internal division and instability, promising instead that a Coalition government would restore order and re-establish the bonds of trust with voters broken under Labor.
He said the budget had lost $3 billion a week in the 10 weeks since the budget was delivered in May.
''In the end, if you can't manage the budget, you can't manage the country,'' he said.
Mr Rudd addressed reporters just after 4pm on Sunday fresh from a visit to the Governor-General's residence, setting a date with electoral destiny that meant missing the G20 summit, and forfeiting the opportunity to stage the previously planned local government referendum which could not be run before September 14.
But in a sign of the increasingly digital dimension of the coming campaign, reporters gathered in the Prime Minister's courtyard at
Parliament House had already read the formal announcement via an email sent by Mr Rudd to supporters from his car.
''It's on,'' the email began. ''Right now the only thing standing between Australia and an Abbott-led government is you, me, and as many Australians as we can rally to fight for the kind of nation we all want to live in.''
According to a source at Labor's campaign headquarters in Melbourne, Labor had signed up more than 1000 volunteers by 6pm following Mr Rudd's email and Twitter appeals for donations and activists.
With polls showing the two sides virtually level on the two-party-preferred vote, the election could go either way, with another hung parliament also possible.
However, Mr Abbott pledged not to negotiate for power in any circumstances. ''There's a commitment that I want to give you. There will not be a minority government led by me. There will not be deals done with independents and minor parties under any political movement that I lead,'' he said.
With the economy the agreed battleground, Mr Rudd railed against negativity, while warning that Mr Abbott planned ''a $70 billion slash-and-burn austerity drive which will cut jobs and cut deeply into basic services and health and education''.
Greens leader Christine Milne said it was clear the two parties had shifted strongly to the right and were no longer offering a real choice.
''Australians will have the choice between the compassion offered by the Greens and the cruelty of the old parties,'' she said, referring mainly to the asylum seeker issue.
''We live in a society, not an economy.''