Labor should use its ‘power for the people’ and lift jobseeker, former RBA governor says

The Albanese government "needs to start using its power for the people like it promised it would," a former RBA governor has said, as he joined calls for a lift to the jobseeker rate.

Bernie Fraser, who was tasked with guiding Australia's monetary policy through 18% interest rates and "the recession we had to have", said the unemployment payment was one of the "many areas desperately needing attention" in the coming budget.

His voice joins the chorus of people - including Labor backbenchers - to publicly demand the government do more to raise the jobseeker rate, which has condemned recipients to poverty.

The government is also facing an internal battle, with MPs demanding the cabinet react to the increasingly loud calls.

Fraser said it was the duty of the government to act in the best interests of its people and during this time of record low unemployment, it had a chance to change some people's lives for the better.

"I am supportive of an increase in the jobseeker allowance - it is not only necessary but timely," he said.

"By providing extra support, it might help enable people to get a good-paying job to change their circumstances."

The government's own expert panel recommended an urgent increase to jobseeker and associated welfare payments, arguing the rate as it was had become a barrier to finding work.

Labor MP Peter Khalil on Wednesday night became the latest Labor MP to publicly pressure his own government to raise the rate. He tweeted that he had joined a growing list of colleagues in signing an open letter from the Australian Council of Social Services calling for a jobseeker increase.

"My comments supporting raising jobseeker are on the record. I've advocated on this issue publicly & internally with colleagues since elected in 2016," Khalil wrote.

"It's the fair & right thing to do so people can live in dignity."

The former Treasury secretary Dr Ken Henry agreed, writing in an opinion piece for Guardian Australia that it was time to raise the rate.

"People who are unable to secure employment within a short period of time, in a labour market this tight, clearly need special help," he wrote. "Equally clearly, they are not getting what they need. Denying them such help, while insisting that they should have to survive on $50 a day for more than 12 months, is simply cruel."

Fraser said it was a "difficult job to fit in all the worthy things" needed in the budget and there were some difficult decisions for the government to make. But he said there was also a clear choice.

"They have got a bit of power. They should be using it for the people."

The treasurer, Jim Chalmers, has not committed to raising the rate, although he has said there will be cost of living relief in the budget with a focus on helping the most vulnerable.

Chalmers said the focus was helping people into work, given Australia's tight labour market. But advocates argue that ignores the realities for the long-term unemployed, who are more likely to be older, low-skilled, experiencing chronic health difficulties or have a disability.

The prime minister, Anthony Albanese, said the budget was yet to be finalised and the expenditure review committee had one more meeting before signing off on the economic plan, which will be handed down on 9 May.

But both Chalmers and Albanese, as well as the finance minister, Katy Gallagher, are facing increasing pressure from the caucus to act, with many backbenchers nervous about the electorate's reaction to a Labor government not living up to expectations.

"The Greens are really nipping at our heels on this and housing and if we don't come up with the solutions people expect from us, then we may not get a second chance," one MP said.

"I don't think there would be many Labor MPs who are not worried about the impact for people trying to live on welfare. There's a public campaign, but there is also a lot happening privately to try and push this."