The Federal Government will trial a cashless welfare card, with payments not allowed to be spent on alcohol or gambling.

The idea was raised in an Indigenous employment review, provided by Andrew Forrest to the Government last year.

Parliamentary Secretary to the Prime Minister, Alan Tudge, confirmed the Government would go ahead with a trial in a number of locations around the country by the end of this year.

Mr Tudge said it would apply to both Indigenous and non-Indigenous people, with the card operating like an ordinary debit card.

"You could use it for anything, you could use it anywhere - but you simply could not purchase alcohol or gamble with it," Mr Tudge said.

A percentage of cash would not be controlled, but Mr Tudge said because the amount of cash was limited "you would not be able to purchase drugs with it".

"This could have a dramatic impact on the community in terms of rates of violence and rates of assaults, particularly against women," he said.

Community consultations will decide trial locations

Mr Tudge has promised to consult communities before deciding where the trials will take place, based on certain criteria.

"Firstly, where there is high welfare dependence and high harm caused by welfare-fuelled alcohol and drug abuse," he said.

"Secondly, where there's some community leadership which is at least open to trialling the card in their community."

Social Services Minister Scott Morrison said it was an "excellent" idea but the Government needed to learn the lessons from the trials before going any further.

"There's no suggestion at this stage that the card will have mainstream application," Mr Morrison said.

"It's there as a key tool to target particular areas of disadvantage and to see whether it can make the big difference that we believe and hope that it can."

Greens and ALP respond to proposal

The Greens voiced their opposition to the idea.

"I think it's really offensive to all Australians to see our Prime Minister standing up with a wealthy and privileged other white man, a mining magnate, telling people throughout Australia who are less well off how they should manage their income," Greens leader Christine Milne said.

Greens senator Rachel Siewert added "the Government has failed to acknowledge that this patronising and paternalistic policy decision will not work".

"It is time for the Federal Government to sit down with communities and develop cooperative programs that address local needs and issues," Senator Siewert said.

The Opposition wants to see more details of the Government's proposal, but Labor's Families spokeswoman Jenny Macklin said Labor does believe in "targeted" income management.

"Labor supports efforts to assist vulnerable Australians in dealing with drug and alcohol abuse," Ms Macklin said in a statement.

"Labor does not believe that everyone on income support requires income management. But Labor does believe that targeted income management can be helpful for vulnerable Australians."

More than 20,000 Australians already have their welfare payments controlled with a t least 50 per cent quarantined for essentials and administered through the Basics Card.

The Basics Card can only be used at approved retailers, while the new welfare card could be used through regular EFTPOS transactions.