The only working-aged beneficiaries who will not have to look for work or training are about 84,000 on invalid's benefits and 7500 on the DPB to care for sick or infirm relatives.
Ms Bennett said that when she became a minister in 2008, welfare resources were geared towards helping people on the unemployment benefit "while ignoring those on the DPB".
"We spend more on helping an unemployed graduate find a job than we do on someone who is sick, disabled or has a child," she said.
"We need to distribute those funds more fairly."
She said the new system would not punish people who could not find jobs.
"If someone can't find a job, their benefits will not be cut. We are merely asking people to be available to work and actively out there looking."
But sole parents would no longer be able to "reset the clock" and stay on a benefit for another 18 years just by having another baby, as 29 per cent of parents on the DPB had done.
The reform would "stop the clock" for only one year after a new baby, and parents would then be subject to the same work requirements as before the birth.
Challenged by a delegate who asked where were the jobs for sole parents and the sick, Ms Bennett pointed to falling unemployment benefit rolls and rising job vacancies advertised online.
Unemployment benefit numbers dropped by 6461 (10.8 per cent) in the year to March 31, partly because since September 2010, Work and Income has made everyone on the benefit reapply for their benefits after a year.
Work and Income boss Janet Grossman told the conference: "You'd be surprised how many people, in reapplying, their circumstances have changed so much they didn't require a benefit."
Regionally, unemployment rolls dropped faster in Auckland (down 3066, or 14.7 per cent) and Canterbury (down 996, or 16.1 per cent) than in the rest of the country (down 2399, or 7.3 per cent) - pointing to a stronger economic upturn in Auckland and migration out of Canterbury after last year's earthquakes.
The Labour Department's trend index of jobs advertised online rose by 8.6 per cent in the year to March, but this was mainly because of a 59 per cent rise in vacancies for skilled jobs in Canterbury. Skilled-vacancy advertising dropped 4 per cent in Auckland and 10 per cent in Wellington.
GOVT SEEKS CHRISTIAN HELP IN SOCIAL ISSUES
The Government has told Christian social service agencies they have the "moral toolkit" required to overcome social problems such as welfare dependency and child abuse.
Deputy Prime Minister Bill English yesterday appealed to Christian agencies to share in taking responsibility for such problems, with the state and the wider community.
But some agencies said they were nervous that "snuggling up too close" to the Government would undermine their trusting relationships with needy families.
"There is a nervousness because it sounds good, but unfortunately Work and Income have got a bad history, they have got a bad name," Nettie Holm of Hamilton family service Te Whanau Putahi said at a Council of Christian Social Services conference in Auckland.
Mr English, who co-chairs a ministerial committee on poverty, told the conference that ministers wanted to try "a range of experiments" to get ministries and contracted non-government agencies to change social outcomes, such as reducing child abuse, rather than counting outputs such as client numbers.
He said the Government would spend "well over $100 million" extra each year from July to pay for more training and other services to help get people off welfare and into work. But in return, ministries and contracted agencies would be held responsible for getting people into work.
He said Christian organisations had "a particularly critical role" because they had a "moral framework" to intervene when, for example, a man was beating his child.
