Tasmanian senator Jacqui Lambie has put a new demand to the Morrison government in the growing debate over welfare reform in a bid to allow unemployed people to keep more of the Newstart allowance when they find work.

Senator Lambie wants to increase the hours the unemployed can work in paid jobs before they lose their government payments, making this a new bargaining chip in her negotiations over other welfare changes.

Jacqui Lambie says Newstart recipients should be allowed to work more hours before their payments are affected. Credit:Alex Ellinghausen

The Morrison government is open to the proposal and appears likely to consider it alongside separate calls for an increase in the Newstart payment after years of complaint that the $555.70 per fortnight rate is too low.

“It’s about giving them a raise or, at the very minimum, letting them work more hours to encourage them,” Senator Lambie said. “They don’t get much money as it is. Why wouldn’t you encourage them and say ‘go and work 12 hours’ or set an amount they can make?"