Tax, welfare interaction under spotlight

The Turnbull government is setting up an inter-departmental working group to analyse the way Australia's tax and welfare systems interact.

The group will be led by Treasury and the Department of Social Services and suggest policy solutions to encourage economic growth to deliver more jobs, higher wages and greater opportunities.

"The way our personal income tax system and complicated welfare system interact should not result in the creation of welfare traps, eroding or even removing the financial incentive to join the workforce," Treasurer Scott Morrison said in a statement on Thursday.