Peter Dutton has apologised for accusing his Labor challenger, Ali France, of “using her disability as an excuse” not to move to the electorate during the campaign.

The apology came a little over an hour after a blistering attack by Labor senator Kristina Keneally, who called Dutton “mean and despicable”, a “thug”, and the “most toxic man in the Liberal party”.

The abrupt turnaround from Dutton came on the second full day of the federal election campaign, during which party leaders out in New South Wales announced increased funding pledges, including more than tripling the Coalition’s $5m commitment to address Indigenous suicide.

Dutton, the home affairs minister and MP for the marginal Queensland seat of Dickson, tweeted his apology on Saturday afternoon.

France lost her leg when she was hit by a car in 2011, while pushing her son in a pram. She lives near Dickson in a home she had renovated with compensation money to make it wheelchair-accessible, and has said she will move to Dickson if she wins.

But in an interview with the Australian, Dutton said of France: “if you are serious about representing an area, you live in that area and using her disability as an excuse for not living in our area is really making residents angry”.

The prime minister, Scott Morrison, had suggested that Dutton’s comments had been taken out of context, and Dutton had doubled down on Friday, saying he was reflecting the concerns of some constituents who believed France’s living arrangement was “more about her enjoying the inner-city lifestyle”.

Speaking to reporters on the central coast on Saturday, Keneally said she was “gobsmacked” that Morrison had not called on Dutton to apologise.

“Is Mr Morrison afraid of Mr Dutton?” she asked.

“Mr Dutton, after all, is a thug. Mr Dutton is the most toxic man in the Liberal party. Mr Dutton is mean and despicable. And Mr Dutton came within a few votes of becoming the Liberal party prime minister. This is a Liberal party divided, divided by anger, fear and loathing for one another.”

Keneally noted Morrison’s announcement of a royal commission into the abuse of people with disabilities last week.

“I give him credit for bearing his heart, showing his compassion and standing up for people with a disability,” she said.

“But this week, Peter Dutton launches a mean, low, despicable attack against a woman with disability, Ali France, a mother who lost her leg shielding her child from a car accident, and Mr Morrison has remained silent.”

The opposition leader, Bill Shorten, said Morrison’s apparent failure to instruct Dutton to apologise showed “how weak the government is”.

“In case there are people out there who say: ‘oh, well, politicians are mean, they say mean things about people with a disability. That’s part of the Australian debate’, I say to every parent of a child with a disability, we do not accept that.”

Shorten’s news conference was to announce Labor’s intention for an $8.6m “slip slop slap 2.0 campaign” to address the world’s highest rate of skin cancer among Australians. The funds would go to the Cancer Council to run an advertising campaign, which Shorten said had not happened for 10 years.

In the Sydney suburb of Ashfield, Morrison announced further details of the Coalition’s intention to increase funding for youth suicide prevention.

The package committed a further $42m to the $461m announced in the federal budget just a week ago.

The budget included $5m earmarked to address Indigenous suicide rates, an amount criticised as being too low. Saturday’s announcement included a further $19m for Indigenous-focused prevention schemes.

“We know what’s been happening in the Kimberley, what’s been happening in the remote parts of our country,” Morrison said.

“These are tragic situations and we’ll be investing that money directly with a package specifically of over $19m targeting those areas which have been most dramatically affected. Our First Australians need us, so their kids can see hope and not choose the darkest of all possible options.”

Asked if $19m was enough to address the national crisis of Indigenous suicide, Morrison said: “if it needs more it will get it”.

He said he would like to visit the Kimberley region during the campaign – where a coronial inquest last year examined the suicides of 12 children – but he wasn’t sure if he would get the opportunity.

Morrison also took aim at the deputy opposition leader, Tanya Plibersek, comparing her to the former NSW Labor leader Michael Daley for her views raising questions over Adani’s Indian owners being able to create jobs.

Daley had accused Asians of taking Australian jobs during the recent NSW state election, comments that cost him the premiership.

Plibersek said on Friday that the job numbers the Adani mine was expected to generate were overstated.

“We can’t rely on an Indian mining company to bring jobs to central and north Queensland,” she had told ABC radio.