These families will now have to make do on the Newstart allowance - a payment so low that the Organisation for Economic Co-operation and Development has described it as one of the lowest unemployment benefits in the developed world.

In the past week we've seen a backlash against the claim by the Families Minister, Jenny Macklin, that she could live on the $35-a-day payment. The insensitive comment flies in the face of mountains of evidence.

The harsh reality of surviving on so little has been documented in numerous reports over the past 12 months, including by three parliamentary inquiries, and most major charities. The most recent Bureau of Statistics Household Expenditure Survey on indicators of financial stress illustrated the bleak picture of life on Newstart. Half of people suffer three or more forms of financial stress - asking for money from family or friends, wearing only second-hand clothes, turning to charities for handouts. More than half were unable to raise $2000 in an emergency and 40 per cent couldn't pay an electricity, gas or telephone bill on time, or afford to go to the dentist. Newstart is $74 below the poverty line. With one in eight people, and one in six children, now in poverty in Australia, it is unforgivable that we fail to act.

But it is not just a question of our responsibility to fix the unbearable daily grind of people relying on these allowances.

The government says that the best way to help people on Newstart is to help them get a job. We agree. The OECD, the Henry tax panel, business groups, economists and other experts all tell us that Newstart is now so low that it is a major barrier for people to find paid work. As the Business Council of Australia says: ''Entrenching people into poverty is not a pathway back into employment.''

It is often argued that Newstart is only a short-term payment. On the contrary, 60 per cent of people have been on the payment for more than 12 months, and the average time is two years. This is not because people are not trying. We hear daily from people aged over 45 who are overlooked because they are deemed too old. This group now constitutes one in three people on the Newstart payment. Far from the out-dated stereotype of young people living it up on welfare, the reality for people on the unemployment benefit is very different. One in six has a disability. Half have less than year 12 qualifications. Many face real barriers to getting back into paid work - discrimination, lack of skills and training, lack of flexible work for those with children and other caring responsibilities being among them.

This is why the Australian Council of Social Service has teamed up with the Business Council of Australia and the Australian Council of Trade Unions to find solutions to getting more of those who are disadvantaged in the labour market into real jobs.

The debate around Newstart comes at a time when business, government and the community is talking about improving productivity. Working together is the way forward at this critical time, with an ageing population, the challenges posed by a changing economy and the need to find revenue to fund important physical and social infrastructure. We urge the government to work with us in this long-term endeavour. The starting point must be an immediate increase to the single rate of Newstart to alleviate worsening poverty and remove one of the major barriers for people trying to participate in society through work.

Now is the time for the government to right a wrong. Newstart hasn't been increased in real terms since 1994 under then prime minister Paul Keating. Since then, Newstart has continued to fall further behind pensions because of inadequate indexation arrangements. Today the difference between these vital payments is a staggering $140 per week. If nothing changes, by 2040 Newstart will be half the rate of the pensions.

We understand there are budgetary constraints, but budgeting is about priorities. Slashing the payments of vulnerable single parents and their children makes no economic sense and is counter-productive to achieving good social and economic participation. This policy should be reversed, the single rate of Newstart raised by $50 a week, and its indexation fixed, as recommend by the Henry panel and others. It is the right thing to do for the economy - removing a barrier to getting people into paid work, as well as injecting money into the economy. Rest assured, every dollar will be spent.

It is clearly the right thing to do for the 84,000 single parent families and the other 575,000 people on unemployment benefits so they get a real chance at a new start in 2013.

Dr Cassandra Goldie is the chief executive of the Australian Council of Social Service.Lenore Taylor is on leave.