City barely scraped into the Champions League qualifying places last term, so sparking a major recruitment drive over the summer.
For Dunne, the changes will make a positive difference and he can see a rebuilt City team again being genuine Premier League contenders.
He told Tribalfootball.com: "There was a massive drop-off last season for City, which was unexpected from that group of players.
"I think the effect of winning the title four years in a row played a big part in that drop-off, so I can only imagine City will raise their levels again this season.
"It's a squad that's been refreshed, so they will be raring to go again.
"There's a point to prove for those players after a disappointing year. They'll certainly have enough quality to compete for the title.
"The depth in the squad is a lot better than it has been in previous seasons, so I think it's a fresh start for them all.
"I'm sure the manager will be desperate to show that last season was a slight blip. I can't see City having another 'off' season like they did last year."
Time to gel
Dunne believes bringing in the likes of Rayan Cherki, Rayan Ait-Nouri and Tijjani Reinders through the door before this summer's Club World Cup will help City start the season in the right way.
He continued: "They've had plenty of time together now to gel, it's been like having a mini pre-season at the Club World Cup.
"I do think the quality of players that Manchester City have brought in has been good.
"Last season, they struggled at times for energy and legs in midfield, so Tijjani Reijnders is certainly a player who can fill that gap.
"Obviously, with Rodri being back, that will make a huge difference for City.
"I'm sure everyone in that dressing room would class last season as disappointing, so the aim and the hunger to challenge for the title again will be there."
- Richard Dunne was speaking to Tribalfootball on behalf of Betway