MICHAEL BRISSENDEN: The Government's $1.5 billion work for the dole program in remote Australia is a failure, job providers and an academic have told the ABC.

They claim figures released last week show the policy has delivered more penalties in the form of cuts to payments for remote job seekers than it has actual jobs.

AM has been told some people have stopped buying food for lack of money.

Kate Wild has this exclusive report from the Northern Territory.

KATE WILD: In Northern East Arnhem Land, where many people depend on welfare for an income, local grocery stores are feeling the pinch.

Data obtained by the ABC shows food sales in the region are down 10 per cent since January.

The Arnhem Land Progress Aboriginal Association, ALPAA, runs remote stores. Its CEO Alastair King, confirmed the figures the ABC has seen.

ALISTAIR KING: Things like baby food and meat have dropped 20 per cent. We're seeing more friction between families, an increase in fighting in and around the store. We've even had an assault of one of our managers.

KATE WILD: He's confident the financial pressure he's hearing about, and seeing in his sales figures are connected to a sharp jump in financial penalties for people who do not turn up to Work for the Dole.

He says food sales started falling at the same compliance rules for work for the dole were tightened.

Under the policy announced last July, jobseekers in remote Australia are expected to take part in 25 hours of work-like activity a week, five days a week or have their payments suspended.

When he announced the policy, the Minister for Indigenous Affairs, Nigel Scullion called the program "the end of sit-down welfare."

NIGEL SCULLION: This is a policy that will work and will re-engage our First Australians.

KATE WILD: Lisa Fowkes, from the Australian National University says it hasn't worked. She's analysed the penalties job seekers in remote Australia have received since last July.

LISA FOWKES: Thirty-seven thousand people in the last six months of last year received over 50,000 financial penalties - and that is more than double the number of penalties that had been applied in the previous six months before these new Work for the Dole arrangements came in, and it's also more penalties applied to that group of people than to the other 95 per cent of unemployed people across the country.

KATE WILD: But Minister Scullion refutes these figures.

In a statement to AM, he said the number of people whose payments had been suspended was likely to be closer to 4,000.

He claims engagement in Work for the Dole under Labor fell to 5 per cent and resulted in a widespread return to passive welfare and 'sit down money.'

Lisa Fowkes says remote job seekers have more onerous obligations under Work for the Dole than their urban counterparts, even though the chances of finding jobs in remote Australia are lower.

LISA FOWKES: By the end of last year you were nearly twice as likely to have received an eight week penalty as you were to have got a 13-week job.

MICHAEL BRISSENDEN: Lisa Fowkes from the ANU, ending Kate Wild's report.