Tony Abbott says Australia shouldn't be content to have about 600-thousand people on unemployment benefits and another 800-thousand on the disability pension.
His proposed reforms were about helping more Australians achieve the self respect that came from making an economic contribution, he said.
"It's certainly not about saving money in the short term, because putting more people on to work-for-the-dole will actually cost money in the short term," he told ABC Radio in Brisbane.
Asked if he believed there was a culture of laziness among some welfare recipients, Mr Abbott said he believed a lot of people had become "defeated".
"Work-for-the-dole is great way of society re-engaging with people who've become economically marginalised."
Historically, there had been a tendency to "give people a cheque and forget about them".
"I think that's absolutely the wrong way to go."
Mr Abbott is proposing a two-tiered disability pension structure: one for people whose disabilities were permanent, and another for those whose disabilities weren't and did not preclude some form of work.
"I'm not talking about cutting benefits, I want to stress that," he said.
