The Newspoll survey recorded a four-point rise in One Nation's primary vote to 31 per cent, while Labor dipped one point to 30 per cent and the coalition fell two points to 18 per cent.
It follows fierce criticism of Labor's controversial tax reform in the May budget, with the coalition opposing the changes, and the Greens yet to indicate they will support the legislation.
Anthony Albanese said his government will continue to focus on making a practical difference to people's lives.
"Many people feel that the system isn't working for them, that they're working for the economy, not the economy with them," he told reporters in Canberra on Monday.
"We want to make sure that we put in place mechanisms that do make a difference, not politically easy decisions, but the right decisions.
"If governments don't respond to that, there'll be a continued rise in populism, be it of the right or the left. It's something that we are very conscious of."
Social Services Minister Tanya Plibersek agreed the country needed to change.
"We see those polls and we get the message, which is we need big changes in this country, and that's exactly what Labor is delivering," she told Seven's Sunrise.
"Pauline Hanson's been around politics for three decades and she still has got a list of complaints and no real policies for change."
Published in The Australian, the Newspoll also showed a one-point decline for the Greens to 11 per cent while backing for those in the "others" category - minor parties and Âindependents - remained unchanged on 10 per cent.
One Nation MP Barnaby Joyce, also on Sunrise, said Labor's "scratchy" reaction to the polling showed it was in serious trouble.
"One Nation is a reflection of the sentiment of the people ... (they) are over Labor and they're over the coalition," he said.
Mr Joyce said the nation needed to re-evaluate the number of people it "could absorb" amid a debate surrounding immigration as housing supply comes under further strain.
Deputy Liberal leader Jane Hume said it was the coalition's job to demonstrate to voters it was a credible alternative that would restore their standard of living.
"One Nation is a grievance party that delivers slogans but not solutions," she told Sky News.
"We'll also make sure that we put Australians first. That's the promise that we'll deliver - a freer and fairer and better Australia."
The latest poll is in line with the results of a recent Redbridge Group/Accent Research analysis that showed One Nation was on track to win up to 59 seats, which would displace the coalition as the opposition and force Labor into minority government.
The Newspoll puts Mr Albanese's net approval rating - the number of people satisfied with his performance minus those dissatisfied - at minus 24.
It found just 36 per cent of participants were satisfied with the prime minister's performance, while 60 per cent were unhappy.
A month ago, Mr Albanese's net approval rating in Newspoll was minus 17.
The survey marks the first time since Newspoll started in 1985 that the major parties, both Labor and the coalition, attracted less than than 50 per cent of the primary vote.
It involved 1240 voters, has a 3.2-point margin of error and was conducted between Monday and Thursday last week.
At the 2025 federal election, Labor received 34.6 per cent of the primary vote while the coalition garnered 31.8 per cent.
One Nation collected 6.4 per cent and did not win any seats in the lower house.
The party has since won its first seat in the House of Representatives after David Farley took the regional NSW seat of Farrer from the Liberals in May's by-election.
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