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 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 a year.
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.
Employment Minister Michaelia Cash announced a new "intensive training stage" will be compulsory for recipients of the payment 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 refuses to take the job will be given the ability to contact the Department of Education, Skills and Employment and report them. If the job seeker doesn't have a valid reason, they will be breached 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 government had been under pressure to increase the rate of JobSeeker before the COVID-19 pandemic's economic hit increased the number of people receiving the payment. As part of emergency economic measures, a COVID-19 supplement of $500 a fortnight was announced for people receiving the payment, which was reduced in September and again at the start of January
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."