Labor has accused the Abbott government of "manufacturing" a welfare crisis ahead of a planned crack down on young people claiming the disability pension.

Under federal government plans to overhaul the welfare system, young people who are deemed partially fit to work will no longer be able to claim disability welfare payments, News Corp Australia reports.

Social Services Minister Kevin Andrews said under the previous Labor government, young Australians were able to claim the disability pension despite their condition being minor.

Labor MP Matt Thistlethwaite rejected the claim, saying the number of people on the disability pension actually decreased between 2012 and 2013.

He said there was no need for a planned overhaul of the welfare system because Australia didn't have a welfare problem.

"They are creating and manufacturing a crisis to ensure they look like they are a government that is doing something," he told Sky News on Saturday.

The federal government is facing criticism for excluding aged pensioners, who make up the majority of the welfare expenditure, in its welfare payments review as it grapples with a budget deficit.

Finance Minister Mathias Corman said increasing workforce participation among younger people claiming the disability allowance was part of the government's agenda to reduce the budget bottom line.

"We don't think that people with temporary health conditions should be put onto the Disability Support Pension for the remainder of their working lives," he told Sky News.

"We want to help people who are able to work back into the workforce. We think that is good for them and it's obviously good for the country."