The Senate has defied Prime Minister Malcolm Turnbull just one day into a three-week special sitting of Parliament, handing him a double dissolution trigger and setting the stage for an unprecedented 75-day election campaign.
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Mr Turnbull's high-risk plan to hold a double dissolution poll on July 2 comes as two new polls found the Coalition tied or even trailing a resurgent Labor opposition.
The government had set aside up to three weeks for a special sitting of the prorogued Parliament, which was opened by Governor-General Sir Peter Cosgrove on Monday morning in a bid to pass laws designed to restore the Australian Building and Construction Commission.
But on Monday evening four of the eight Senate crossbenchers - Jacqui Lambie, Glenn Lazarus, Ricky Muir and John Madigan - stared down Mr Turnbull's threat of a double dissolution poll, even at the risk of their own seats.
The government was defeated in a 36-34 vote.
That means the May 3 federal budget will now form a key element of the government's re-election pitch and that a pair of untested leaders - neither Mr Turnbull nor Opposition Leader Bill Shorten have led their party in a campaign before - will fight for Australians' votes in what shapes as a marathon political contest.
Mr Shorten is due to deliver his budget reply speech on May 5, and Mr Turnbull must visit the Governor-General no later than May 11 to formally issue the writs and announce the poll.
On Sunday, Mr Turnbull confirmed defeat of the ABCC bill would mean "there will be a dissolution of both houses and an election of the 2nd of July" and speaking after the Senate vote, Liberal Senate leader George Brandis said the restoration of the ABCC was an important part of the government's economic agenda.
"We are a government that is prepared if we can't get the Senate by a majority to agree with us, to take it to the people ... the budget won't embark on the kind of reckless spending and a significantly greater levels of taxation which seem to be at the heart of the Labor Party's economic plan," he said.
The Opposition Leader said Labor was ready for an election "whenever it is" and that the contest would be "between Labor putting people first, and a Liberal Party looking after vested interests and the big banks".
"Australians know where Labor stands and what we stand for: decent jobs, protecting Medicare, better schools, renewable energy and a fairer tax system ... Australians are fed up with a Prime Minister who dithers but doesn't deliver," he said.
In a day of high drama in Canberra, Labor deputy Senate leader Stephen Conroy attacked Sir Peter after he addressed Parliament ahead of the special sitting to consider the ABCC bills. "A strong governor-general would never have agreed to this," he said.
Senator Conroy said the ghost of Sir John Kerr - the governor-general who dismissed the Whitlam government - "reached out from the grave to interfere in a democratically elected Senate decision".
Mr Turnbull called on Mr Shorten to condemn the senator's comments.
"Not for the first time, Senator Conroy has disgraced himself and I look forward to the Leader of the Opposition publicly disassociating himself from those appalling remarks reflecting, as Senator Conroy did, on the integrity and the office of the governor-general," he said on Monday afternoon.
Mr Shorten later reprimanded Senator Conroy , a close factional ally, over his "intemperate and unnecessary" remarks.
The Coalition and Labor traded blows in question time on Monday about their competing promises to tackle union lawlessness and to hold a royal commission into the banks.
Economic management and its plan to stamp out industrial lawlessness will be at the heart of the government's re-election pitch, while Labor will push for a royal commission into the banking sector while arguing its plan to reduce negative gearing, capital gains and superannuation tax concessions will leave it best placed to fund hospitals and schools.
The cabinet is understood to have signed off on a range of measures that will boost corporate regulator ASIC's powers on Monday, in a move designed to respond to concerns about the behaviour of the major banks, and head off Labor's politically popular push against the banks.
Mr Turnbull and Defence Minister Marise Payne also announced that up to 21 new Pacific Patrol boats, 12 offshore patrol vessels and nine future frigates will be built in Adelaide and Perth.
Once the final designs of the vessels are decided on and building is under way from 2018, the project will deliver hundreds of new jobs and billions in new spending.
The announcement will also buttress the Coalition's vote in Western Australia and, in particular, South Australia. A further announcement on the location of where future submarines will be built is expected in the next month.
The government's plan to abolish the Road Safety Remuneration Tribunal is also expected to be dealt with by the end of the week.
The latest Fairfax-Ipsos poll published on Sunday found the two-party preferred vote tied at 50-50, while Newspoll showed Labor leads the government 51-49.
