The unemployment benefit will be permanently lifted by $25 a week when the emergency coronavirus supplement is pulled in March.
Prime Minister Scott Morrison's announcement on Tuesday means the base rate for JobSeeker will rise modestly to $615 a fortnight - or $43.57 a day - from April 1.
Recipients of JobSeeker and Youth Allowance will also be able to earn $150 more a fortnight before their payment is reduced, a measure the government says will increase the incentive to look for work and take shifts available.
The increase will cost the government $9 billion over the next four years.
Welfare advocacy groups which have campaigned for a more substantial permanent increase have savaged the $50 per fortnightly rise, with one peak body labelling it a "heartless betrayal of millions of people with the least".
Mutual obligations - tasks like appointments with a job provider or job applications - will also be re-introduced at the levels required of job seekers before the pandemic.
Job seekers will be required to search for at least 15 jobs per month from April 1, increasing to 20 per month in July.
Employment Minister Michaelia Cash announced a new "intensive training stage" will be compulsory for recipients after six months on the payment.
"In other words, we're going to give them the best chance they can to do a short course to enhance their skills or to do some work experience. If they then do remain on welfare, that will give them an even better chance of getting a job," Senator Cash said.
Employers who offer a job to a recipient of JobSeeker, who then knock it back, will be able to report them to the Department of Education, Skills and Employment.
If the job seeker doesn't have a valid reason, they will be hit with a breach by the department, something that could mean they lose the payment.
"We will at the same time be increasing the number of audits of our job providers. We need to ensure our job providers are following up on our job seekers and ensure they are doing the right thing," Senator Cash said.
The Morrison government had been under pressure to increase the rate of the old Newstart before the COVID-19 pandemic's economic hit increased the number of people receiving the payment.
As part of emergency economic measures, a coronavirus supplement of $550 a fortnight was announced for people receiving the payment. The top up was cut to $250 in September, and then to $150 in January.
A single adult with no children on JobSeeker will receive $715 a fortnight until the emergency support winds up at the end of March.
The new permanent rate is $100 lower than that amount.
About 1.2 million Australians - including 11,308 people in Canberra - were on JobSeeker in January.
The Australian Council of Social Service, which had been pushing for a $25-per-day increase to the base rate after the supplement was removed, said the $3.50-per-day increase announced on Tuesday showed a "complete lack of humanity and empathy".
"This is a heartless betrayal of millions of people with the least, including hundreds of thousands of children, single parents, people with disability, older people, students, people dealing with illness and injury, and others relying on income support," the peak bodies chief executive Cassandra Goldie said.
The Salvation Army said a $250 per fortnight increase was "the absolute minimum needed to allow Australians to live with frugal dignity".
"A permanent increase of $25 a week does not even begin to address the depths of disadvantage in Australia," it said.
Asked about criticism that the increase was still not enough, Mr Morrison said the government needed to strike a balance. He said the adjustment meant JobSeeker would now be about 41 per cent of the national minimum wage, up from 37 per cent and in line with where it sat under the Howard government.
"I have no doubt that at whatever rate you set the payment, there will always be suggestions by some that it should be more," he said.
"There'll be some who suggest it should be less. That's why a government has to exercise judgement in getting that balance right."
He once again referred to additional supplements like rent assistance. A single person on the unemployment payment also receiving rent assistance will get $776.40 a fortnight after March, he said.
"The suggestion that anyone who was on JobSeeker is on that payment [base rate] alone, is not correct," he said.
Labor won't stand in the way of the increase, and has still avoided committing to a figure it believes the payment should increase by.
"It's important there be a permanent increase and that be done as a matter of urgency, just to provide certainty for people as well," Labor leader Anthony Albanese said ahead of the announcement on Tuesday.
"I don't quite understand why this government has held back on this announcement. I look forward to it being announced today and then Labor will obviously respond after we've given it proper consideration."
The Greens and advocates for those receiving social security payments have already blasted the increase as too low.
"$25 a week is shit," Greens senator Rachel Siewert tweeted.
In the press conference announcing the change on Tuesday, Mr Morrison linked the new rate of JobSeeker to the start of the vaccination rollout, saying it marked a "new chapter" in the country's response to the pandemic.
"That is as true for the economic supports and other measures that have been in place as emergency measures, as it is indeed true for the many responses put in place on restrictions and things of that nature, and that will continue to change over the course of the year," he said.
"But Sunday was a change day. Sunday was a day that Australia confidently moved into the next phase of how we fight this pandemic and we battle to secure the livelihoods and lives of Australians."