Families Minister Jenny Macklin has apologised for claiming she could live on the dole, conceding the comment was "insensitive".

Ms Macklin angered welfare groups when she made the remark last week, amid a growing push by community organisations and business leaders for an increase to the $35-a-day payment.

Dozens of protesters rallied outside the Minister's office on Friday, demanding an increase in the Newstart allowance and chanting "Shame, Jenny Macklin".

Asked about it yesterday, Ms Macklin backtracked from her previous comments, adding that it would be "very hard" to live on such a low income.

"I can understand that people are angry about what I've said - I have heard that message very clearly over the last week or so," she told reporters in Sydney.

"I do acknowledge that my remarks were insensitive and I'm certainly very sorry for that."

As a cabinet minister, Ms Macklin earns about $328,700 a year - or $6,321 a week.

Her comments sparked renewed debate about the level of unemployment benefits and whether they were too low.

There is growing momentum within Labor ranks for the allowance to be increased, with one party source saying this week that there were was "serious" support for the idea in cabinet.

'Show some heart'

Former prime minister Kevin Rudd weighed into the debate on Friday morning, urging the Government to boost the payment, especially given the decision to dump the budget surplus promise.

"This is a country with a bit of a heart... I think this is the sort of area where we should be showing a bit of a heart as well," Mr Rudd told ABC News 24.

"These are folk who are doing it tough, but I'm not going to get in the business of supporting one option or another.

"I think we could be doing more."

There are divisions within Labor about the best way to go about the change, with some arguing for an across-the-board increase to the payment, while others suggest a more targeted approach.

Asked today whether she supported an increase in the dole, Prime Minister Julia Gillard replied: "I understand it's very, very tough for people on low and fixed incomes to make ends meet.

"We keep our focus on creating jobs, because the best thing we can do for anybody who's experiencing unemployment is to make sure that there's a job available for them."

The Coalition has previously expressed guarded support for an increase, although acting Opposition Leader Warren Truss on Friday questioned Labor's ability to afford the extra spending.