The government should look at an unemployment insurance scheme and add new benefits to help support people who lose their jobs, the Productivity Commission suggests.
A commission report sets out what it calls 'promising options' on how to boost income security and, ultimately, lift the country's low productivity and subdued wage growth.
"There is a case to improve income security for displaced workers with income smoothing policies that cushion the financial shock of job loss," the report said.
"Doing so could ... enable those who lose their jobs to take more time to search for a better, high-paying job that is a good match for their skills."
The report said current policies were largely based on job security - to keep people in their jobs - but need instead to focus on income security to increase innovation.
It said means-tested benefits which target low-income households had forced many ineligible people to rely on their partner or their own savings for money if they were made redundant.
Commissioner Andrew Sweet said the job-seeker benefit did not provide enough income support on its own.
"In most other countries they, of course, have benefits like that, but in addition, they have a mechanism that can last between six months to two years," he said.
"New Zealand and Australia are the only countries in the developed world that do not have some mechanism that provides a higher level of income support."
However, he was not sure if seasonal workers should be given the same level of income support.
"It would just seem unnecessarily costly, and just not especially sensible to provide them insurance for something [redundancy] that they always knew from the outset was going to happen," Sweet said.
The report suggested the Tripartite Forum on the Future of Work analyse the income support options further.