After an appalling three weeks for Prime Minister Julia Gillard, the campaign for the August 21 election has begun showing the first signs of swinging back towards the Government.

Two new polls returning Labor to a small lead were followed yesterday by an economic debate between Treasurer Wayne Swan and Opposition counterpart Joe Hockey in which the Coalition failed to make significant ground.

Handing Labor further ammunition, Hockey produced figures on campaign promises differing by about A$7 billion ($8.4 billion) from those calculated by Opposition Leader Tony Abbott earlier in the day.

The Opposition is already protesting at Labor advertising targeting Abbott's economic credentials by using archived quotes by former Liberal Treasurer Peter Costello and former Prime Minister John Howard.

Howard is quoted on the advertisements as saying Abbott was "not interested in economics and has no interest in it"; Costello is shown laughing off Abbott's expertise during a question-and-answer session.

Yesterday Costello attacked the advertisements, describing them as deceptive and urging Gillard to have the "decency" to remove them: "Let me make it clear - the person in this election who I endorse on economic management is Tony Abbott."

But Abbott has continued to refuse to meet Gillard in a second leaders' debate on the economy, initially declined after the Prime Minister began trailing in the polls and reversed an earlier decision to hold only one nationally televised debate.

Abbott said that his schedule was set and that he saw no reason to meet Gillard only because her campaign was collapsing.

The two leaders have now agreed to separate "town-hall" style question-and-answer meetings with 200 voters at a Returned and Services League hall in the western Sydney suburb of Rooty Hill tomorrow night.

Gillard said if they were both to be in the same place at the same time she would be happy to turn it into another debate: "I don't see how Mr Abbott can say ... that he won't debate me now."

The Government's confidence has been improved by what it hopes will be the end of the debacle over the ousting of Kevin Rudd, with the former Prime Minister now back campaigning in key Queensland seats and supporting Gillard's leadership.

If it can continue to push Rudd into the background - and with Abbott's centrepiece launch out of the way - Labor now has the chance to focus strongly on its own agenda and the official campaign launch in Brisbane next Monday.

But Gillard remains in trouble and will need to gain traction.

Newspoll and Galaxy polls in Fairfax newspapers yesterday put Labor back in the lead in the two-party preferred vote that decides elections, but the Government still trails in primary votes and will depend heavily on preferences from the Greens.

The two-party lead is still statistically thin and far from conclusive.

The Galaxy poll in the Daily Telegraph gave Labor a two-party lead of 51 per cent to 49 per cent, which the newspaper said could allow Gillard to sneak back in - albeit with a very strong prospect of a minority government and three independent MPs.

The Newspoll in the Australian put the Government's two-party vote at 52 per cent, ahead of the Coalition's 48 per cent, but showed 43 per cent of voters could change their minds before polling day, or were uncommitted.

Significantly, both polls showed serious reservations about Abbott: Galaxy said 48 per cent of voters did not believe he was ready to govern, compared with 43 per cent who thought he was, and Newspoll found Gillard remained preferred Prime Minister by a 15-point margin.

Labor is now trying to swing focus back on to the economy, which it regards as a strength and on which it sees Abbott as vulnerable, despite polls consistently rating the Coalition as a better economic manager.

Two key report cards - the Treasury's pre-election economic statement and the Reserve Bank's latest outlook - have both confirmed the strength of the economy and the role Labor's stimulus package played in supporting Australia through the global financial crisis.

The Reserve Bank's decision to keep interest rates on hold was also a bonus for Labor.

These points were hammered home by Swan during yesterday's nationally televised debate with Hockey, repeating the mantra that while massive debt had been necessary to survive the crisis, growth was now strong, employment climbing, and the budget would be back to an A$3.5 billion ($4.2 billion) surplus within three years.

Hockey's attack on Labor's economic management, the size of government debt and mismanaged stimulus programmes - plus the promise of a bigger surplus - was eroded by his own boss.

Hockey said Coalition campaign promises so far totalled A$25.7 billion ($31 billion); Abbott said they amounted to "well under" A$18 billion ($21.7 billion).

SOUNDBITES
* Former Treasurer Peter Costello, slamming Labor advertisements using an old clip of him laughing off Tony Abbott's economic credentials: "Well it is very deceptive, it's deceptive and it's been cut, and if Julia Gillard had half an ounce of decency she'd get it off the air."

* Costello's own words, in his memoirs: "Tony always saw himself as something of a romantic figure, a Don Quixote ready to take on lost causes and fight the great principles, never one to be held back by the financial consequences of decisions, he had grandiose plans for public expenditure."

* Treasurer Wayne Swan's take on Abbott's economic policies: "A whole lot of empty slogans but no economic plan for the future."

* Abbott, on Labor's tactics: "By sandbagging marginal seats, the Government will try to chisel its way to a dishonourable victory, like the South Australian and Tasmanian Labor governments did earlier this year."

* Annabel Crabb, in ABC's The Drum on what Sunday's launch showed about the Coalition: "That it thinks it can win, simply by not looking too mad. And not being the Labor Party."

* Abbott, to Channel Nine, on the latest polls showing Labor has reclaimed the lead by a whisker: "What it shows is that the electorate is, I suppose, a bit volatile."

* Nine political editor Laurie Oakes on his boss's apology to Julia Gillard for former Labor-leader-cum-60 Minutes-reporter Mark Latham's weekend ambush of Julia Gillard: "David Gyngell was right to say Mark Latham crossed the line and to apologise. The trouble is that I am not sure Mark Latham knows where the line is. He's not a journalist; he's still full of bile and settling old scores."