Unemployed workers will receive a permanent $50 a fortnight increase to the JobSeeker payment once the coronavirus supplement is scrapped at the end of March.

That represents an extra $3.57 a day and will come with much stricter requirements.

"The government has missed its opportunity to be a government that stood for human decency ... that stood for human dignity. To be a government that stood and genuinely had people's backs," Australian Council of Social Service chief executive Cassandra Goldie said on Tuesday.

"What we've got today represents a heartless betrayal of the millions of people who have been hit by unemployment."

ACOSS and other welfare and activist groups had been fighting for a permanent boost to the payment, which was temporarily doubled during the COVID-19 pandemic.

It wanted an increase of at least $25 per day, from the old rate of $40 a day. Other groups like GetUp! were fighting for a minimum payment of $80 per day.

"This $3.50 per day is a mean-spirited and complete betrayal of what is needed," Dr Goldie said.

She says the size of the increase shows the government is out of touch with the reality of having little money or a low income.

Cliff Fraser, a 61-year-old resident of Skipton near Ballarat, was earning almost $120,000 a year as an interstate truck driver until he suffered a heart attack in 2012.

He could no longer hold a heavy vehicle licence and was unable to find other full-time work despite training as a computer technician.

Now he lives off the JobSeeker payment and a small income from working two hours a day cleaning at a primary school 30km from his home.

Mr Fraser said the government's announcement made him feel unwell.

"It's an insult," he told AAP. "I have worked very hard in my lifetime and supported my country, but now that I need some support I am being let down."

The boost to the payment during the pandemic had allowed him to pay his phone bill so he can make calls and send messages, as well as get his car serviced and pay other bills on time.

The new rate will not allow him to keep up with those basic expenses, he said.

"I think politicians just do not understand, they live in a financial bubble," he said.

The modest increase to the base rate will be paired with tighter eligibility rules and harsher mutual obligations.

Employers will be able to dob in people on unemployment benefits who are offered a job and do not accept. Individuals may have their welfare payments docked if they cannot produce a valid reason.

Dr Goldie warned the harsh measures would foster a "culture of division and mistrust".

She said millions of people would be "deeply distressed" at the decision but urged jobseekers to keep fighting for a higher rate.

Other groups have also criticised the government's announcement.

Mission Australia CEO James Toomey described the rate increase as an "appalling decision".

Anglicare Australia executive director Kasy Chambers said it was really a cut, given the coronavirus supplement would be eliminated.

The Australian Unemployed Workers Union called the decision "unspeakably cruel".

Australian Associated Press