Psychological and psychiatric conditions are the number one reason job seekers on the Newstart payment are found unable to work, as new figures reveal 42 per cent of those on the payment have some sort of exemption.
Of the 686,785 people on Newstart at the end of June, almost 300,000 were assessed as only having a "partial capacity to work" - meaning they have an impairment or disability that prevents them from being able to work more than 30 hours a week.
Including Youth Allowance and those on a parenting payment with mutual obligations, 306,684 are considered to have a partial capacity to work.
Just 52,536 are exempt from looking for work completely, while the other 254,148 are still required to undertake some form of job search or study.
The overwhelming reason for the partial capacity is psychological or psychiatric conditions - 128,820 cases, followed by 94,162 people with musculo/skeletal and connective tissue problems.
Around half of Newstart recipients with a partial capacity to work are assisted through the department's Disability Employment Service.
The number of people on Newstart with a partial capacity to work has increased by 60 per cent since 2014, at the same time as the number of people on the disability support payment has decreased after reforms introduced by the Gillard and Abbott governments.
The proportion of those on Newstart with a medical condition affecting their ability to work has also increased, from 25 per cent in 2014 to 42 per cent in 2019.
"These figures indicate that the current system is failing people, particularly the most vulnerable members of our community," said Greens senator Rachel Siewert, who requested the figures in a Senate question on notice.
"Our job service providers are not equipped to assist people with mental health issues and it's clear that people are falling thought the cracks. We know through questions at Estimates that over 104,000 people have dropped out of jobactive and our income support system."
Senator Siewert said the number of people reporting mental health issues exacerbated by the system was concerning.
"We have heard evidence through the Senate inquiry into Newstart that people on the low rate of Newstart are going without their medication because they cannot afford them. This is incredibly dangerous for those with mental ill health."
A spokeswoman for Social Services Minister Anne Ruston said almost two-thirds of new entrants to Newstart leave the payment within a year and the proportion of Australians on a income support payment is at its lowest level in 30 years.
"But in accepting positive results we acknowledge that some indicators are showing there is more work to be done in some areas which the Government is determined to address," she said.
"That is why we are so focused on investing in programs that break down barriers that some unemployed Australians face getting into the workforce including job seekers who are facing mental health challenges."