A class action against the federal government's unlawful robodebt scheme has settled on the first day of a Federal Court trial.
About 400,000 Australians who had money taken from them unlawfully in the federal government's robodebt scandal will be compensated for more than $1.2 billion.
While not admitting legal liability, the Commonwealth settled a class action on the day a Federal Court trial had been due to begin over the scheme.
The government agreed on Monday to pay $112 million in compensation to about 400,000 individuals as well as legal costs.
“We want to acknowledge the courage of the lead applicants; Katherine, Elyane, Steven, Felicity, Shannon and Devon, who led these proceedings on behalf of all Robodebt victims in pursuit of this class action, which has allowed this outcome to be achieved today," spokesperson from Gordon Legal, Partner Andrew Grech said.
This comes on top of $721 million the government had previously agreed to repay over the scheme declared unlawful in the Federal Court last year.
It has also dropped $398 million in debts it had been pursing against class action members, law firm Gordon Legal said.
The robodebt saga involved matching Australian Taxation Office and Centrelink data to claw back welfare benefits the government said had been overpaid.
The class action was launched on behalf of people who received notices through the automated debt recovery process and began last year.
Speaking after the settlement announcement on Monday, Prime Minister Scott Morrison said his government has been focused on "making this right".
"We are righting a situation which has found to have been present in this program over two governments," he said.
"That is what the government should do. That is what the government has done - that is what we will continue to do."
Asked if he would apologise for the scheme, Mr Morrison referred reporters to comments he made in Parliament earlier this year, when he apologised for any "hurt or harm" it caused.
This came after the government announced it would refund the overpayments collected through the scheme after it was deemed unlawful.
“I made remarks on that in the Parliament earlier this year. I can only refer you back to those where I did just that," Mr Morrison said on Monday.
He said "most importantly" the government had began "settling" payments raised through the debt recovery program., noting it had already paid back more than $700 million of the $721 million it had agreed to repay in May.
Federal Labor frontbencher Bill Shorten said he was pleased with the settlement but criticised the government for dragging out the case.
He said Labor would continue to push for a royal commission into the controversial debt-recovery scheme.
"Today, it means that 400,000 victims of the government's illegal protection racket … these people have got some justice," Mr Shorten said.
"This is a good day for them, but I think the rest of Australia, and the people who were damaged by this process can say: 'who was responsible?'"
Mr Shorten questioned why it had taken a class action for the government to respond to victims' concerns.
"You shouldn't have to go in the biggest class action in Australian history to get this government to adhere to the law," he said.
"We have got to make sure this never happens again."
Greens Senator Rachel Siewert called the settlement "another indictment" on the "abominable actions" of a government that went after the "most vulnerable" in the community.
"It will be almost impossible to account for the social and economic costs of the government's punitive robodebt program," she said.
"We still don't know what the government knew and when and they are still desperate to cover it up."
With additional reporting by AAP.