The Federal Government's work for the dole program in remote Australia has failed after just 12 months and is increasing financial hardship for jobseekers, industry figures have told the ABC.

Key points: Figures suggest policy has delivered more penalties than jobs

Figures suggest policy has delivered more penalties than jobs Food sales have dropped in some areas after tightening of dole conditions

Food sales have dropped in some areas after tightening of dole conditions Indigenous Affairs Minister rejected criticism of the program

Data released by the Department of Employment last week showed around 6,000 people had their work for the dole payments suspended for eight weeks between July and December 2015, Lisa Fowkes from the Australian National University said.

People on work for the dole in remote Australia are required to do work-like activities such as landscaping, community clean-up, walking children to school and housing repairs.

To receive full payment people must take part in the activities 25 hours a week, five days a week or risk having their payment suspended.

Ms Fowkes said just over 6,000 people had found work that lasted up to 13 weeks under the Community Development Program (CDP).

"By the end of last year you were nearly twice as likely to have received an eight week penalty as you were to have got a 13-week job," she said.

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Ms Fowkes said more penalties had been applied to the 5 per cent of Australians on work for the dole in remote Australia than to the remaining 95 per cent of unemployed people in the program across the country.

But the Minister for Indigenous Affairs, Nigel Scullion, strongly rejected criticism of his Government's remote work for the dole program.

He said the number of remote jobseekers with suspended payments was likely to be closer to 4,000.

Food sales drop after penalty rule changes

Job providers said there was anecdotal evidence an increase in welfare penalties under work for the dole since July 2015 was having a social impact.

The CEO of the Arnhem Land Progress Aboriginal Association (ALPA), Alastair King, said there had even been an assault.

"We're seeing more friction between families, an increase in fighting in and around the store. We've even had an assault of one of our managers," he said.

ALPA runs work for the Ddle programs in Arnhem Land in the Northern Territory and supermarkets in communities across the Top End of the Territory, Cape York and Torres Strait Island.

Mr King confirmed the sale of fresh food at ALPA stores had dropped 10 per cent since January when the Government tightened rules on penalties for people who did not meet their work for the dole conditions.

He said the organisation was prompted to check its supermarket figures after reports people were arriving at work for the dole activities hungry.

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Mr King said sales of baby food and meat had dropped more than 20 per cent in ALPA stores since January and people were buying cheaper tinned and processed food.

He said he was confident the sales figures were connected to work for the dole financial penalties because the two trends started at the same time.

But Senator Scullion said claims people are receiving less money are "false and inaccurate".

"These pieces of anecdotal data are very disconnected," he said.

Mr Scullion said financial penalties only applied until a person agreed to return to work for the dole activities.

"[Then] the payments are resumed and the back payments are made. So this notion that is floating around that somehow there is less money to spend - at worst they've been delayed," he said.

CDP: How does it work and why are penalties rising?

Senator Scullion announced in December 2014 that the Coalition's CDP would replace Labor's Remote Jobs and Communities Program (RJCP).

Since July 2015 CDP has required remote job seekers on work for the dole to do 25 hours a week of work-like activities five days a week.

People who miss an appointment with their job provider or do not turn up for activities can have their welfare payments suspended.

The Minister said CDP would "re-engage our First Australians". He pledged $1.5 billion to CDP over four years.

But David Thompson, the CEO of Jobs Australia, said the program did not engage people.

Jobs Australia represents non-government organisations that run work for the dole programs in remote areas.

"I've said this to the Minister himself, all sorts of things have been tried and have generally not succeeded in these communities. This initiative looks like it is going very fast down that same path," Mr Thompson told the ABC.