The Federal Government's planned waiting period for young people to access unemployment benefits has hit a Senate-shaped roadblock for the second time in as many years.

The original plan was to enforce a six-month wait, but the unpopular 2014 budget measure was blocked.

It was revised to a one-month delay in this year's budget, but the Government was unable to sway enough support to get the legislation over the line. It was voted down 30 to 35.

Independent senators Nick Xenophon, Jacqui Lambie and Glenn Lazarus, along with Palmer United's Dio Wang and the Motoring Enthusiast Party's Ricky Muir, voted with Labor and the Greens to defeat the bill.

The Government said the measure would have saved the budget $173.3 million over the next four years.

Greens senator Rachel Siewert welcomed the rejection of a measure she described as "cruel and harsh".

"This sort of measure that keeps young people off income support means that young people are subjected to living in poverty, which is another barrier to being able to find work," Senator Siewert said.

"The Government during the debate today were claiming it wasn't saving them money, because they claim to be investing money in young people ... although I think it was a savings measure on the backs of young people.

"They were also taking the opportunity to put in place harsh punitive measures on young people, when there was no evidence to support that."

Officials from the Department of Social Services admitted to a Senate committee there had been no modelling to suggest enforcing such a wait would prompt young people to get a job.

"The tide was fairly against the Government in the beginning," Senator Siewert said.

"The community very clearly rejected making young people wait six months."

Proposal should be 'dead, buried and cremated'

Senator Siewert said she would be surprised if the Government brought the proposal back for a third outing.

"The Government would be very silly to bring such a measure back again," she said.

"The Senate clearly said in rejecting this that they want a fairer approach, and they don't want young people to be subjected to these punitive measures."

Senator Siewert was not the only person hoping the plan would not return.

"We hope it's dead, buried and cremated," Peter Davidson from the Australian Council of Social Service (ACOSS) said.

"These payments are $300 a week or less, people are required to search for 10 jobs a fortnight, maintain contact with their employment service provider, and for every interview they don't attend, their money is docked.

"It's hardly a holiday living on unemployment benefits."

Both ACOSS and the Greens want more funds directed to programs ensuring job seekers are ready for employment.

Morrison not up to his usual standard: Leyonhjelm

Liberal Democrat David Leyonhjelm joined Family First's Bob Day in voting in favour of the delay, and criticised some of his crossbench colleagues for being "financially unrealistic".

He said it may have been a different outcome if Social Services Minister Scott Morrison had negotiated with them properly, but that he was likely to have a few more tricks up his sleeve.

"He wasn't up to his usual standard, I can certainly say that - yes he could've done more," Senator Leyonhjelm said.

"Scott's almost certainly got Plan B ready I think, so I would suggest this won't be the end of this issue.

"Social welfare should be for the genuinely poor and disadvantaged, not for a bunch of bludgers and people who could work.

"I'm not suggesting that's all of them, or even the majority of them, but there are some welfare recipients who shouldn't be getting welfare."