An analysis of Bureau of Statistics data by Fairfax Media shows that the number of people out of work for more than a year rose  to 175,200 people in January, an increase of more than 150 per cent since mid 2008. Welfare experts say being out of work for long periods can affect future employability, as well as physical and mental health.

Australian Council of Social Service chief executive Cassandra Goldie said the rise was a "significant and disturbing trend" that could be "traced back" to the financial crisis.

"While overall, Australia weathered the storm relatively well, the most obvious and disturbing impact is in terms of people who have been out of the labour market and can't get in," she said.

Brotherhood of St Laurence executive director Tony Nicholson said the economy had changed rapidly since the financial crisis, with a greater emphasis on service and knowledge industries, and it was hard for many people to adjust.

Mr Nicholson said both the young - without skills and experience - and the old, in particular those in declining industries, were being hit by long-term joblessness.

Although overall unemployment has been rising in recent years and gained political attention, there has been much less emphasis on people who are out of work for long periods, despite the damage it can cause. The Bureau of Statistics data shows that the level of long-term unemployment has risen much faster than overall unemployment and nearly one in four people unemployed have been out of work for at least a year.

Separate data released on Thursday also points to the growing problem of people on welfare for long periods. Department of Social Service data shows the number of people on the main welfare payment, the Newstart Allowance, has continued to climb to almost 533,000 in January 2015 from record levels reached at the end of 2014. The data reflects the rising numbers of long-term unemployed and people moved onto Newstart from single-parent and disability payments due to changes to government policy.

The number of long-term Newstart recipients, who have received the payment for more than a year, has doubled since the global financial crisis in 2008.

Dr Goldie said the federal government should abandon "wasteful" programs such as Work for the Dole,  which research indicates has been ineffective, and place greater emphasis on wage subsidies for employers to hire the long-term unemployed as well as more investment in support and case management.

Mr Nicholson said the employment placement system, Job Services Australia, was failing and was not designed to respond to the structural changes within the the economy.  "Giving people some preparation with their CV isn't going to equip them to take up opportunities in the modern economy."

There has to be a greater emphasis on re-skilling or even re-locating people while taking into account that the jobs are often where housing is least affordable, he said.