Mothers with young babies and sick and disabled people on benefits would be forced to look for work under a proposed overhaul of New Zealand's welfare system.

A Welfare Working Group report released to Government today calls for fundamental changes to reduce the state's "unacceptably high" welfare bill.

Its key recommendation is scrapping all existing benefits, including the Domestic Purposes and Sickness Benefits, and replacing them with a single Jobseeker Support payment.

That payment would be administered by a single Crown Agency - Employment and Support New Zealand - standing at "arms length" from the Government.

Under the new system, a vast majority of beneficiaries would be required to apply for jobs regardless of difficult family circumstances, long term illness or disability.

Mothers would be forced to look for work once their first child turns three.

But that age limit would be reduced to 14 weeks if a mother had a second child while on the benefit, in the only recommendation not unanimously endorsed by the working group.

The proposed move is described as a way to eliminate incentives for beneficiaries to have additional children.

It is supported by a call for contraceptives to be handed out to help welfare dependent families "manage their fertility".

The report says helping mothers, widows, sick and disabled people to find work removes the "offensive and disempowering" connotations that go with being on the Invalid's, Widow's or Domestic Purposes benefits.

It also recommends improved partnerships to reduce the "intolerable" 31 per cent Maori unemployment rate.

Iwi, Maori organisations and Governments are encouraged to partner to reduce the rate through whanau-centred support into paid work.

Welfare Working Group chair, economist Paula Rebstock, says the proposed changes are aimed at increasing the number of beneficiaries supported to find paid work from about 132,000 to 275,000 - or from 37 to 77 per cent of all working age people claiming welfare.

They would reduce the total number of beneficiaries from 360,000 to 260,000 and lower the Government's forward liability from $47 billion to $34 billion by 2021, she says.

"The social and economic costs of the current New Zealand welfare system are unacceptably high and the potential benefits of reform are so significant that fundamental change is needed.

"There are currently few incentives and little active support for many people reliant on welfare to move into paid work...

"Enabling people to move into paid work reduces poverty and improves outcomes for key at-risk groups, including young people, sole parents, disable people and those who are sick."

The report calls for the new agency overseeing the plan - Employment and Support New Zealand - to be held accountable for reducing the cost of welfare and stopping long-term dependency.

It asks for a culture change from the current system, with more emphasis put on efficiency and service delivery.

Contracts to service providers would be contestable, rigorously designed, accountable and focussed on outcomes.

Ms Rebstock says the changes should add up to a sustainable welfare system which empowers people to find work.

"The Welfare Working Group is confident that if the reform package is implemented effectively, it will have a positive impact on many individuals, their families and the wider community."

Key recommendations from the report

* Most sick and disabled and sole parents with no children under 3 must look for at least part-time work.

* Benefits should be cut by 25 per cent for first failure to meet work obligation, 50 per cent for second failure, 100 per cent for third failure and 13-week stand-down for any further failure.

* All current benefits should replaced by one Jobseeker Support payment at dole rates, with supplements for sick, disabled and sole parents.

* Work and Income should be replaced by ACC-style "Employment and Support NZ", with a business-oriented board.