Labor is attempting to cut off any recovery for the Coalition in the critical state of Victoria, with a new attack advertisement targeting the home affairs minister, Peter Dutton, while the Coalition is attempting to land a knockout blow on Labor’s health policies, as the election campaign pushes into its second week.

With the latest Newspoll showing Labor still in the lead, but an improvement in the Coalition’s primary vote because of a drop in support for One Nation, the Morrison government went on the offensive on Monday over Labor’s health commitments, forcing Bill Shorten to defend his $2.8bn hospitals package.

As Morrison intensified efforts to wrongfoot Shorten on health, which is an area of core strength for Labor politically, Pauline Hanson, shrugging off Monday’s Newspoll slump, told Sky News she would determine where her party’s preferences were directed seat by seat.

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But she made a public overture to the National party. “I will be talking to the National party who are not that bloody-minded that they said we’d go below Labor. So we will be looking at those National party seats, if they still want to talk to me.

“But I’m not going to be treated like a fool by the major political parties and think that I owe them something – I owe them nothing.”

The Coalition opened campaign hostilities on Monday questioning whether Shorten would restore a 50-50 funding split with the states. Labor has accused the Coalition of a $2.8bn cut to health because the 2014 budget abandoned a promise for the commonwealth to provide 50% of activity-based hospital funding. It currently only provides 45%.

Facebook Twitter Pinterest Bill Shorten speaks to Cassandra and baby Myah at Casey hospital in Melbourne. Labor has committed to work towards 50-50 hospital funding with the states. Photograph: Lukas Coch/AAP

But Labor’s policy – which includes $1bn in capital spending and $250m to reduce elective surgery waiting lists – only promises to provide 50% of recurrent hospital spending by the end of a five-year agreement with the states, in 2025.

Asked if Labor would commit to 50-50 funding if the true cost exceeded $2.8bn, Shorten told reporters in Melbourne that Labor had committed to “work towards 50-50, so the answer is yes”.

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“Our best estimates is that this has been a cut of $2.8bn,” he said, accusing the federal government of “[decreasing] the proportion it contributes to the states” with a cut of $635m in Victoria alone.

The Coalition has also launched a counterattack against Labor’s $2.3bn cancer package, arguing the true cost of eliminating out-of-pocket costs for all cancer-related Medicare items is $6.8bn over four years.

On Monday the Coalition’s campaign spokesman, Simon Birmingham, refused to say if the Coalition had given up on trying to match Labor’s cancer package, telling reporters in Canberra the government would take an “appropriately budgeted, careful approach”.

Last week before the campaign began Scott Morrison said the Coalition would “look carefully” at the package “because we will all stand with those … with those who are suffering with cancer”, which “should be above politics”.

Pushed if the government would improve its offering on cancer, Birmingham said the Coalition would “continue to announce policies between now and the election day” and said the government was taking advice from clinicians.

“What we have not done is go out and make a rash promise that is uncosted, is lacking in detail and raises false hope when the Labor party is clearly not able to meet what it is they’ve promised.”

Labor’s policy has been costed by the Parliamentary Budget Office and is estimated to deliver six million free cancer scans funded through Medicare and three million free consultations with oncologists and surgeons for cancer patients.

Morrison campaigned on Monday in the seat of Deakin, the electorate where Shorten opened Labor’s 2019 campaign last week, and in the seat of Chisholm. Labor is targeting both seats in this contest.

Government MPs in Victoria think the Coalition could lose four or more seats to Labor on May 18, but a number report that sentiment in Australia’s most progressive state has improved in the state since last year’s state election, where there was a strong negative swing against the Liberals in heartland seats.

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Flanked on Monday by Michael Sukkar, the Liberal member for Deakin, who was one of Dutton’s key numbers men in last year’s move against Malcolm Turnbull, Morrison was asked whether last year’s leadership change was continuing to damage the Liberals’ standing in Victoria.

Morrison brushed off the inquiry. “That is such a bubble question. I’m just going to leave that question in the bubble.”

With Labor targeting Dutton in the state, Morrison was asked again about the home affairs minister accusing his Labor opponent in Dickson of using her disability “as an excuse’’ for not moving into the electorate – comments Dutton later apologised for.

Morrison told reporters people should not play politics with disabilities. “I am going to make the assumption that every single candidate in this campaign wants the best for people with disabilities,” he said.