The change is being favoured after confirmation that Commonwealth revenue will be down a massive $17 billion on Treasury projections and amid speculation of a further write-down in the region of $20 billion for 2013-14.

Encouraging the jobless to undertake more work follows backbench pressure over the meagre $38-a-day Newstart allowance and the plight of up to 80,000 single parents pushed from the Parenting Payment Single on to the lower dole payments from January 1, 2013 replete with the lower income threshold.

Collapsing revenue, first acknowledged as a shortfall of $7.5 billion since October, then extended to $12 billion last week, is now likely to come in as a $17 billion shortfall when calculated over the full 12 months from July 1, 2012, to June 30, this year. The revenue write-down has economists warning of deficits as far as the eye can see, beginning with the 2012-13 surplus-turned-deficit of greater than $11 billion.

Heading into its most difficult budget yet, just months from the election, the government on Tuesday dropped its promised boost to Family Tax Benefit (A) payments set to flow to 1.5 million families from July 1.

The payments were to be funded from the Minerals Resource Rent Tax, which will raise just $800 million in its first year, rather than the forecast $2 billion.

Strapped for cash, the government has been lobbied by its MPs concerned that the forced switch from the Parenting Payment Single (PPS) to the much lower Newstart allowance, has hurt some of the community's least well-off.

While welfare groups, the Greens, and many in Labor, believe a $100-a-fortnight increase to the current $537.80 rate is needed, the government has been searching for an alternative given the stresses on a budget.

At a cost of $5.6 billion over four years, lifting the Newstart allowance has been rejected.

Instead, economic ministers favour easing the ''tapering'' rules - the rate at which private earnings from casual or part-time work, cause welfare payments to be phased down or cut out entirely.

Labor backbenchers across all factions have complained that some single parents transferred from the dole once their youngest child had turned eight, had lost up to $100 a week, merely for trying to do better for their families.

Single parents receiving the $683.50 per fortnight PPS, were shifted to Newstart four months ago. It was designed to save about $700 million over four years.

The federal government's Department of Human Services website explains that under existing taper rules of the PPS, ''income over $176.60 per fortnight (plus $24.60 for each additional child) reduces your payment by 40¢ in the dollar''.

However, under the lower Newstart, it advises, ''income over $62 per fortnight reduces your payment by 40¢ in the dollar''.