Unemployed workers are set to receive a modest boost to JobSeeker payments once the current $150-a-fortnight coronavirus supplement is scrapped.
The increase is expected to be paired with stricter mutual obligation requirements after the current supplement ends on 31 March.
Without government intervention, the unemployment benefit would return to its pre-pandemic rate of $565 a fortnight, or just $40 a day.
Senior ministers have held a series of meetings to determine a new permanent JobSeeker rate after Prime Minister Scott Morrison flagged last year that the payment was likely to continue at an elevated rate after 31 March.
The new welfare rate is expected to be taken to the Coalition party room in Canberra on Tuesday and announced afterwards.
"I think there's a fair case to ensure that there's greater equity going forwards," Health Minister Greg Hunt told reporters at Parliament House.
"This has been a difficult economic period for many Australians, but because of our health success, we've been able to mitigate the economic challenges for Australians. But nevertheless, there are ongoing challenges."
The federal opposition has been calling to increase the JobSeeker rate for several years.
"$40 a day is too low," Labor frontbencher Bill Shorten told Nine. "I don't think anyone can live on that and so therefore an increase is overdue and will be welcomed."
The unemployment rate has not been increased in real terms since the 1990s.
Welfare organisations, business groups and the Reserve Bank have also called for a permanent increase to the payment, warning more than a million people are struggling to afford rent, bills and essential items.
Australian Council of Social Service chief executive Cassandra Goldie urged the Coalition to ensure the final rate was "humane and does not leave millions of people in financial distress and deprivation".
"Already, at $51 a day with the current Coronavirus Supplement, people on JobSeeker are being forced to make impossible decisions, choosing between housing, food, medications, basic toiletries and paying bills," she said in a statement on Monday.
“The government’s decision will impact millions who have the least, including hundreds of thousands of children whose parents are locked of paid work, people with a disability, students, older workers, people with a chronic illness, single parents, people from all walks of life."
The organisation, which works to reduce poverty, has called for an increase of at least $25 a day - or $350 a fortnight - which would bring the total daily JobSeeker rate to $65.
“For far too long, our unemployment payment, which is the lowest in the OECD, has been brutal and inhumane. The Morrison Government has an opportunity here to make a historic decision that would dramatically reduce poverty, changing lives,” Dr Goldie said.
As the government prepares to increase the benefit, it is also putting the squeeze on unemployed people to find work.
There are about 1.2 million people on JobSeeker payments.
Social Services Minister Anne Ruston believes hundreds of thousands of welfare recipients are single, have no children and no medical barrier to full-time work.
"Just as the government takes seriously its responsibility to support people doing it tough, people accessing social security payments must take seriously their obligations to taxpayers to look for work and take it up," she told News Corp.
"We would encourage anyone who finds themselves unemployed to work with their employment service providers to look outside their past experience and use the opportunity to retrain or to try something new."
Senator Ruston said various sectors were crying out for more staff.
"Whether it may be a short term job in agriculture or casual work in the caring industry because modelling tells us that people who report earnings, even just a small amount, are at least twice as likely to exit the social security system," she said.
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