Welfare recipients in western Sydney will be subjected to random drug testing from January, if Parliament passes the Coalition's controversial plan for a two-year trial.

The Federal Government will today announce it has chosen Canterbury-Bankstown as the first location for the trial due to the high number of jobseekers applying for welfare payments, as well as a rise in methamphetamine-related hospital admissions.

At the same time, the Government will unveil plans for a "dedicated treatment fund" of up to $10 million to support jobseekers in the trial and those who test positive to drugs.

The trial of 5,000 new welfare recipients across three separate locations is due to begin in January next year but Labor and the Greens are firmly opposed to the plan meaning the Coalition is relying on the support of the Senate crossbench.

Social Services Minister Christian Porter has defended the new approach, saying it was "entirely focused on helping job seekers overcome drug problems" and not about "penalising or stigmatising" them.

"We want to help people in this situation," Mr Porter said.

"Failure to do so simply leaves people at risk of a cycle of welfare dependency."

One positive result and payment is through basics card

About 12,000 jobseekers in the Canterbury-Bankstown region are currently receiving the Newstart or Youth Allowance payments.

Figures from the Human Services Department show that over an 18-month period, the number of recipients given an exemption from their "mutual obligations" because of drug dependency rose from eight to 21.

If the trial goes ahead, the Government expects about 1,750 people in the region to be randomly tested with the first tests due to begin in late January or February.

Those who initially test positive to cannabis, ice or ecstasy will have 80 per cent of their welfare payment quarantined onto "basics cards", which can only be used for certain purchases such as rent, childcare and food.

A second positive test would see the welfare recipient charged for the cost of the test, and referred for treatment.

Human Services Minister Alan Tudge said income management was already in place in Bankstown and was "a proven and effective tool to help welfare recipients manage their money".

What do people in western Sydney think?

John Russell says western Sydney has significant drug use but the testing should extend to other areas. ( ABC News: Mark Reddie )

While some believe it is only fair that those receiving welfare are drug tested, many western Sydney residents feel it is unfair the trial would only target their region.

"People on the dole need to be responsible and I think drug testing will help them in their search for work and to live a better life," John Russell said.

"[But] I do believe it should apply to areas outside Bankstown, but this area does have a lot of drug use and crime. Hopefully drug testing will benefit everyone living here."

Fuad Alnatour agreed the Government needs to ensure welfare is used to improve people's lives, but testing needs to be across Sydney.

Fuad Alnatour supports the Federal Government's drug testing trial for welfare recipients. ( ABC News: Mark Reddie )

"I have friends on dole payments and they spend their money on drugs and then have none for food," he said.

"I think it's good to try out the drug testing in Bankstown first but it should extend to other parts of Sydney."

But Valerie Giammarco said alternative measures to help those dependant on drugs need to be considered.

"I've worked in this area for many years and I've never seen people on drugs. I think the Government is unfairly stigmatising people on welfare payments through random drug testing," she said.

"We should be thinking about other ways to help them, investing in counselling or rehab services, not restricting their Centrelink payments."

Valerie Giammarco wants to see investment in rehabilitation and counselling to help drug users. ( ABC News: Mark Reddie )

Only 22 out of 8,000 tested positive in NZ

Dr Nadine Ezard, clinical director for alcohol and drug services at Sydney's St Vincent's Hospital, argued there was no evidence the drug testing would increase jobs or help people with substance abuse issues to return to the workforce.

"We're looking at a situation that's been developed without any evidence that it will work for what it's supposed to do," she said.

"It's very expensive. The Government hasn't released how much it will cost but when we look to other experiences, for example in New Zealand back in 2015, they spent around a million dollars on testing just over 8,000 people and only 22 people tested positive.

"We need to argue whether this is a good use of public funds."

Dr Ezard said the program was likely to increase the stigma around drug abuse and prevent people from seeking treatment.

The two-year trial has been slammed by anti-poverty activists who have said it was a discriminatory move that would profile vulnerable people.