Bill Shorten says no one in parliament could live on Newstart's $40 a day, so a Labor government will run a "root and branch" review of welfare payments.
Some experts say Newstart is keeping people in poverty, and Anglicare research shows people on support payments cannot afford rental properties in major cities.
"I do think there's a real problem for the government payments for the people at the very bottom of our society," Mr Shorten told reporters on Wednesday.
"That is why Labor has proposed having a root and branch review of our government's payment system on Newstart and like-minded allowances and payments.
"Who on earth amongst the government or anyone in the parliament could live on the Newstart allowance?"
Mr Shorten called on the government to join Labor in reviewing Newstart and lifting payments.
Economist Chris Richardson, who launched the Deloitte Access Economics Budget Monitor on Monday, said unemployment benefits have become "embarrassingly inadequate".
He called for benefits to be lifted by $50 and immediately indexed to wages.
Greens senator Rachel Siewert went further still, demanding the "woefully low" Newstart payment be increased by $75 a week.
"The government has spent years vilifying people on income support - this needs to stop and this budget the government needs to recognise that payments need to increase," Senator Siewert said.
"Keeping those without a job living below the poverty is unconscionable."
Jobs Minister Michaelia Cash was asked if Newstart's $40 a day was "cruel" to people on unemployment benefits.
"We focus very much on getting people off welfare and into work. The best form of welfare is a job," she told reporters.
"It is there to provide a basic safety net for those who are looking for work who are on welfare."
