If re-elected, National will take half or all of jobseekers' benefits off them if they fail to meet drug rehabilitation, work experience or training obligations.
Labour's social welfare spokesperson has slammed the policy as part of a punitive approach to welfare that isn't working.
The sanctions are part of a new policy package that would provide guaranteed work experience or training for every person who has been on a jobseeker benefit for six months or longer. It would also include drug rehab services for every beneficiary who identifies drug use as a barrier to employment.
Social Development Spokesperson Anne Tolley said the additional support comes with personal responsibilities.
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"Those who won't take the opportunities available to them will lose all or part of their benefit until they take steps to turn their lives around."
"We know benefit sanctions are an effective tool to help people into work, as 95 percent of people who receive a formal warning meet their obligations within four weeks."
The changes include ensuring all people under the age of 25 receive a one-on-one case worker.
The sanctions will only apply to beneficiaries without children.
"Job seekers without children who refuse work experience or training or recreational drug rehabilitation will lose 50 per cent of their benefit entitlement after four weeks of not meeting their obligations, with further reductions if that continues.
"This will also apply to those who continue to fail recreational drug tests, where these are requested by prospective employers," the policy release says.
The changes would be rolled out from July 1st next year.
Labour's social development spokesperson Carmel Sepuloni says National's policy to introduce harsher penalties is a continuation of their punitive approach to welfare that isn't working.
"The reality is all of this has been done over the last nine years, it's had no effect on youth unemployment," Ms Seupuloni said.
"We take a potential-based approach, viewing beneficiaries as people who have potential and deserve to be invested in rather than as potential liabilities and pushing them off welfare into minimum wage jobs or not even a job."
She said Labour's policy of three years of tertiary education would help people to upskill and find long-term, sustainable employment.
Ms Sepuloni said there were 72,000 young people not in education or unemployment.
"Education is the leveller. No young person should be denied access to an education."
Labour will release a new social welfare policy later this week.
Green poverty spokesperson Marama Davidson said the sanctions are "Not only not fair, they're also not helpful. Sanctions don't help people into a better place."
Ms Davidson said that drug use among beneficiaries was "a tiny small problem", and the bigger problem was the number of people living below the poverty line.
The Greens would remove all sanctions for beneficiaries and would boost core benefits by 20 percent.