Federal Employment Minister Tony Abbott is calling for tax cuts to low and middle income earners as part of the Government's welfare reform agenda.
Mr Abbott says personal income tax reform and higher welfare payments will help families suffering under the present system.
He says current high marginal rates punish low income earners moving from unemployment to work, with their tax rates often higher than those of chief executives.
The Minister says welfare reform must be done on a large scale if it is work properly.
"Down the track, when we come to make further policy decisions, there' ll be an argument about whether we should have a "big bang" reform, or more incremental reform.
"Certainly, my instict is, if you want to do something, do something that makes a real difference."
But, Labor's family services spokesman Wayne Swann says the reforms are only a reaction to Labor's repeated criticism of the current system.
"We've been talking about tax credits and reform of the family payments system.
"Mr Abbott is responsible for this system that punishes hardworking families. The harder they work the less they get."