Leading drug rehabilitation providers again rounded on the federal government on Tuesday over its proposed drug-testing trial, after it named Canterbury-Bankstown as the first of three locations where unemployed job seekers would be drug tested.

Matt Noffs, chief executive of the Noffs Foundation, Australia's largest drug and alcohol treatment service provider for young people, said the trial would exacerbate drug-dependency and risk replicating the rampant drug-crime problem which ravaged Cabramatta during the 1990s.

"We are going to see a return to Cabramatta, but instead of Cabramatta it will be closer to the heart of the city," he said.

"By taking away those supports from young people who are already in a cycle of drug dependence, you're going to push them further to the brink. The easiest job they're going to get is drug dealing."

Announcing the trial in Bankstown on Tuesday, the Social Services Minister, Christian Porter, said the policy was "focused entirely on helping job seekers overcome drug problems" and was "not about penalising or stigmatising people who have a barrier to employment which is as serious as drug abuse".

Under the two-year trial - a policy which was first unveiled in the May budget - 5000 new recipients of Newstart Allowance and Youth Allowance will be drug tested for illicit substances such as ice, ecstasy and marijuana across three locations.

Beginning as early as January, about 1750 people will be tested at a Centrelink centre or nearby facility in Canterbury-Bankstown over the two-year trial period.

Canterbury-Bankstown was chosen due to its high growth in welfare recipients - more than 5600 people began Newstart or Youth Allowance payments in the area last year - and an increased in ice-related hospitalisations in the area.

The trial is accompanied by strict income management measures. People who test positive to two drug tests will have 80 per cent of their welfare payment redirected to a cashless welfare card, which quarantines the money for use on essential goods and services such as groceries.

The Human Services Minister, Alan Tudge, said income management was a "proven and effective tool to help welfare recipients manage their money" and would limit the amount of money available to fund drug-using.

As part of the trial, the government has committed $10 million to fund treatment services for those jobseekers who test positive across the three sites.

However, for the trials to take place, the government will need to find support on the Senate crossbench to pass the legislation after Labor and the Greens declared their opposition.

Senator Nick Xenophon - who commands three votes - said his party was working constructively with the government on the proposal but expressed concern about some details.

"We haven't got a closed mind to this but we want to make sure there are clear costings and outcomes and it's about helping people rather than punching people," Senator Xenophon said in a press conference.

He said he would prefer to see rehabilitation as a first step after a positive drug test - rather than the immediate enforcement of a cashless welfare card - and did not want the measure to be a "ticking the box exercise".

Nadine Ezard, clinical director at Sydney's St Vincent's Hospital alcohol and drug service, said the policy had been formulated without the advice of addiction medicine specialists and was unsupported by clinical evidence.

"This is the key question: can the government point to a single piece of evidence - here or overseas - that shows the likelihood of this approach succeeding? They can't because it doesn't exist," Ms Ezard said.

"There's been no clinical input in putting this policy together despite its potential impact on the health and well-being of people with substance use issues.

"By definition, people with severe substance use disorders are unable to modify their behaviour, even in the face of known negative consequences."

Yvonne Bonomo, director of the department of addiction medicine at Melbourne's St Vincent's Hospital, said the trial was an expensive way of directing people towards addiction treatment.

"In 2015, the New Zealand government spent $1 million testing 8000 people, with only 22 testing positive - it was not a cost-effective use of precious resources," she said.

"A much less expensive and more effective approach would be to use the already existing flags within the welfare payments system - which indicate when someone is struggling with their drug and alcohol use - and support these people to access health services in a timely way."