GOING DOWN FIGHTING

Four nights ago, when a nervous Wayne Swan rose to deliver the budget that was crafted to create a "stronger, smarter, fairer Australia", the public galleries were sparsely populated and unanimated, his colleagues were stoic, sullen and stern, and the mood almost funereal.

Nation-building programs attracted occasional, but restrained "hear, hears" from the Labor MPs behind him, though a few were clearly disengaged. When Swan finished, with two minutes to spare on his allotted 30 minutes, the applause and congratulatory hugs and handshakes from colleagues were over in a matter of seconds.

Two nights ago, when a similarly nervous Tony Abbott stood in the same chamber to outline his plan to "restore hope, reward and opportunity", the atmosphere was transformed. Supporters packed the public galleries and, from the outset, punctuated his address with rapturous applause.

When he concluded, fixing his gaze on the television camera lens and declaring "It's all about you, the Australian people. We pledge ourselves to your service," the standing ovation continued well after Anna Burke, the Speaker, announced the proceedings were adjourned, departed the chamber and turned on the kettle back in her office.

The contrast was as stark as it was predictable - so predictable that one Labor MP instructed his young staff to stay back on Thursday night to witness Abbott's budget reply. "I wanted them to watch what happens when an opposition is getting ready to smash a government," is how he explained it.

The story of the two speeches is a metaphor for the state of political play. The expectation of wipeout on September 14 cast a pall over what is universally accepted as Julia Gillard and Wayne Swan's last stand, and invited closer scrutiny of the man who seems poised to realise his dream.

If there was a consensus among Labor MPs, it was that Swan had delivered a good budget, a responsible budget and one that was true to Labor values. It couldn't boast, as Paul Keating did in 1988, to have brought home the bacon. Almost certainly, it wouldn't save Labor's bacon. But it gave the party a foundation on which it could fight, and promised a legacy beyond the failure to deliver a single surplus in the Rudd and Gillard years.

The problem for Gillard, however, is the view among many of her own MPs, the press gallery and the political class in general that no one is listening - that the contest that is still 119 days away is already over, and that the next generation of Labor leaders will be obliterated from the electoral map. "This is about the eradication of the Labor Party as we know it," is how one MP describes it. "That's how angry people are."

No wonder the Prime Minister's communications director, John McTernan, called Labor's media advisers together on budget eve and played them the scene from the 1970 movie Patton, where the general addresses his troops before the D-Day landings and declares: "No bastard ever won a war by dying for his country. You won it by making the other poor dumb bastard die for his country."

McTernan is convinced the budget provides the basis for a Labor fightback and was intent on instilling a will to win into his own battered troops before they embarked on the task of selling the budget. "I'm not guaranteeing to you that we can win, but I'm telling you there's a guaranteed way to lose - and that's thinking that you can't win," is how he expresses it.

Certainly, Gillard still projects confidence that she can do what now seems impossible. Having stared down those who wanted her replaced, not once but twice, she has no choice. But the sheer scale of the task was underscored in the public reaction when on Wednesday she broke down in Parliament when introducing legislation to fund DisabilityCare, the national disability insurance scheme.

Jenny Macklin, the minister responsible for the scheme, was sitting behind the Prime Minister when she spoke of recent encounters with those who expect their lives to be transformed by the reform and Gillard's voice began to break.

Macklin, who has accompanied Gillard to all the recent events where states and territories signed up to the scheme, is prone to displays of emotion herself and says Wayne Swan joked later that he would have bet on her, not Gillard, tearing up when history was made in Parliament.

"When she got to talking about these lovely young people she'd met, it really brought home to her what this means to these youngsters who can really expect a different life," says Macklin, who consoled Gillard with a hug.

Yet, an analysis by iSentia reveals that the reaction to this rare and clearly genuine display of emotion by the Prime Minister was "moderately unfavourable" on talkback radio, with remarks including: "Gillard is crying for herself, not disabled people."

The response on commercial radio to the budget overall was similarly "slightly unfavourable", with some callers saying they did not understand how the other centrepiece - better school funding - would work. "Callers were generally negative towards pre-budget predictions, including the lack of a surplus, but many were positive regarding the axing of the baby bonus, some referring to it as 'middle-class welfare'," reports iSentia's John Chalmers.

For her part, Macklin insists she still believes Labor can win the election. "I'm in it to win it," she tells Fairfax Media. "This is one of the most significant reforms for a whole generation and I want to be there to be part of implementing it. I'll be fighting every single day and out talking to people about it and all the other great things that we have done and continue to do."

Similar confidence is expressed by former teacher Deb O'Neill, who holds the Gosford-based seat of Robertson, by just 1 per cent. She says she now has a very powerful message to tell constituents on school funding, disability reform and road funding. "What happened this week was that we delivered a values budget that absolutely reveals what we stand for," she says.

But O'Neill's problem isn't with anything the budget proposed to do - including the $43 billion in savings that aim to produce a balanced budget in 2015-16 and a modest surplus in 2016-17. It's the failure to deliver what was promised in last year's budget, starting with a surplus this year that became an $18 billion deficit.

It is also the legacy of the challenge that wasn't on the last sitting day before the budget - the one that saw Simon Crean sacked for tapping Gillard on the shoulder, Kevin Rudd shy away from contesting because he didn't have the numbers, and two of Crean's cabinet colleagues, Martin Ferguson and Chris Bowen, resign because they could not give Gillard unqualified support.

Daryl Melham, who holds the seat of Banks in Sydney's west by just 1.5 per cent, is a realist, but not a fatalist. He concedes that Labor has bled since the last election produced a hung parliament and says the mood in the Parliament during Swan's speech was hardly surprising in the circumstances.

"To me, the message has got to be: You might not like us, but sit down and have a look at what we've done: 950,000 more jobs, low inflation, low interest rates and a plan for the future."

One mistake Labor made was to spin the budget as a wedge for Abbott, who had warned in advance that Labor would set "booby traps" that would force him to make unpopular choices.

Would he vow to reinstate the axed baby bonus and, if he did, what cuts would he make to pay for it? Would he back the school funding reforms that are already the subject of an agreement with the New South Wales government? And what about the budget's commitment to improve public transport in the big cities?

Predictably, Abbott sidestepped the baby bonus trap in his budget reply, declaring the Coalition may not oppose any of the savings in the budget and "reserves the option to implement all of them, in government, as short-term emergency measures to deal with the budget crisis Labor has created".

But he did open himself to scrutiny, and Labor attack, on several other fronts. First, by promising to delay increases to the superannuation guarantee for two years, he invited the accusation that he had broken his pledge there would be no unexpected adverse changes to superannuation under an Abbott government.

Second, by reaffirming his opposition to the school funding plan that emerged from the Gonski review if it is not supported by all the states, he confirmed that this will be a major election battleground. Even without more agreements with the states and territories - and it is very likely others will sign up - the potential for a grassroots "I-give-a-Gonski" campaign is real.

"Tony Abbott doesn't seem to get how crucial this school funding reform is for our future prosperity - or how well understood across the community the need for fairer and more effective funding really is," says Schools Minister Peter Garrett.

Third, by using a number of already announced cuts to pay for keeping the carbon tax compensation when the tax is abolished, he has invited speculation on what he will cut to pay for his other priorities - including the company tax cut that is to offset the levy big business that will pay to fund his generous paid parental leave scheme.

Fourth, the promise of separate white papers on tax reform and the roles of federal, state and local governments has already prompted Labor claims the real agenda is to cut back services and speculation an increase in the GST could be up for discussion - though Abbott vows any changes will be put to the people at a subsequent election before being implemented.

Fifth is the question of consistency. Just weeks after shadow treasurer Joe Hockey said "if there is no carbon tax, there is no need for compensation", Abbott has announced that the compensation will stay. Then there is the question of how much power bills will actually fall once the carbon tax goes.

Even in the case of DisabilityCare, where Abbott's commitment to the reform has been unequivocal, he makes it clear that a Coalition government could take a different approach to Labor, saying: "We'll ensure that the scheme reflects the Productivity Commission's recommendations rather than becoming another big government bureaucracy."

For all of the above, Abbott's most potent pitch in his budget reply was not about a particular program or fiscal goal, but the promise of another style of government altogether. "I'm offering what should be normal: careful, collegial, consultative, straightforward government that says what it means and does what it says."

So, while the budget has clarified the election battle lines, the only new dynamic is that the focus is turning to the Coalition.

In the words of one Labor insider: "The pressure is now actually on them to not lose it from here - not to stuff it up."