Centre-left Labor slipped four percentage points from the previous fortnight's survey to have just 43 percent of the overall vote -- taking alliances with minor parties into account -- against conservative Liberal/National coalition's 57 percent.
And support on a single-party basis fell to just 28 percent, Labor's lowest showing since September, according to a Newspoll of 925 voters conducted as the party was crushed at weekend elections in the northern state of Queensland.
Queensland Labor is likely to retain just seven seats in the state parliament to the conservative opposition's 78 in a result seen as a dire warning to Gillard's fragile national government ahead of elections due next year.
Gillard said the Queensland result was a "very severe" and difficult defeat which showed that Labor "need to listen" -- but she dismissed the polling.
"I could wake up every morning and worry about the polling or I could wake up every morning thinking about the future of our nation. I chose to do the latter," Gillard said on the sidelines of a nuclear summit in Seoul.
"My job is to both listen and lead and that's what I will be doing as prime minister."
Were an election held today the Liberal/National coalition would storm into office, with Labor's one-party vote 10 percent below the level it was at when Gillard managed to scrape back into power in 2010.
The Newspoll, published in The Australian newspaper, put Gillard ahead of opposition leader Tony Abbott as preferred prime minister, 40 percent to his 37 percent.
But more people were dissatisfied (58 percent) than satisfied (31 percent) with her performance.
Gillard has a majority of just one seat in the federal parliament and her popularity has been hit by campaigns against the introduction of new taxes on corporate pollution and mining profits.
A damaging row with her predecessor, Kevin Rudd, who she deposed just ahead of the 2010 elections and who attempted to make a dramatic comeback earlier this year, has also damaged Labor's image.