Treasurer Jim Chalmers attacked Mr Dutton's leadership style, arguing it was stoking culture wars and potentially harming social cohesion.
He accused Mr Dutton of being the most divisive figure in a major political party, arguing it was being done "deliberately, almost pathologically".
"This is worse than disappointing, it is dangerous," he said.
Treasurer Jim Chalmers has launched a stinging attack on Liberal leader Peter Dutton. (Darren England/AAP PHOTOS)
But the opposition leader rejected the claims.
"If the economy was running as great as Jim Chalmers claims it is, why is he dedicating his speeches to me?" he told reporters in Brisbane on Tuesday.
Mr Dutton accused Labor's ministers of focusing on themselves, "which is exactly what we saw in the Rudd-Gillard years".
But the treasurer doubled down on the remarks, drawing a line between social cohesion and effective economic management.
Prime Minister Anthony Albanese backed the critique.
"Peter Dutton has promoted his division his entire political career. He always looks for what will divide Australians, rather than what will bring Australians together," he told reporters in Sydney.
"He never has an answer that's positive or constructive."
Deputy Liberal Leader Sussan Ley noted Jim Chalmers has a PhD "in politics, not economics". (Darren England/AAP PHOTOS)
Deputy Liberal Leader Sussan Ley rejected the bold claim and accused the treasurer of hypocrisy, arguing the treasurer was only trying to "talk tough" in front of Labor colleagues.
"Divisive is to unleash the voice, spend $500 million and then say that if you vote no, you're a bad person - that's divisive," she told Sky News on Tuesday.
"I feel a bit sorry for Jim Chalmers, he spent his whole life planning and plotting in Labor's factional queue, only to come up with this sort of stuff.
"He's got a PhD in politics, not economics and that's on full display."
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