SYDNEY - Voters went to the polls on Saturday in a by-election in Australia's Victoria state seen as a referendum on Prime Minister Anthony Albanese's handling of cost of living pressures across the country.

Australian households have been under broad financial pressure from high inflation, which although recently easing has prompted the nation's central bank to hike interest rates by 425 basis points since May 2022 to a 12-year top of 4.35%.

"We know people have done it tough through cost of living pressures, but we've been prepared to take action, decisive action, to alleviate that," Albanese told Australia's Channel Nine TV on Saturday, according to a transcript.

The cost of living squeeze is said to be a key issue for voters in the electorate of Dunkley, in outer-metro Melbourne, currently held by Albanese's centre-left Labor Party on a margin of 6.3%.

Labor is expected to be returned in the by-election but suffer a swing against it, according to a poll from February.

The by-election, sparked by the death of the sitting Labor MP, comes after Albanese in January announced a revamped tax policy set to reduce benefits to the wealthy while giving low-income earners more breaks, in a bid to help with nationwide living costs.

"The tax cuts (are) for every single taxpayer in Dunkley, and indeed every single taxpayer watching this program right around Australia, as opposed to just some," the prime minister said.

The main political opposition, climbing in popularity in recent polling, says Albanese has failed to keep a lid on everyday costs like petrol, groceries, and mortgage repayments.

"You can understand that there is a level of anger on the ground," Liberal leader Peter Dutton told Sky News TV on Friday, according to a transcript.

(Reporting by Sam McKeith in Sydney Editing by Chris Reese)