Government lawyers warned the welfare recovery scheme was illegal on the same day it was suspended last year.

"One theory is that they didn't know and they're just incompetent ... their explanation is essentially they're idiots," Mr Shorten told Sky News on Friday.

"I think they were so keen to make up a false budget surplus they thought they could get away with picking on the poorest Australians, the most vulnerable Australians."

Government Services Minister Stuart Robert has not publicly commented on legal issues clouding the scheme.

Australian Associated Press