Benitez is reportedly considering staying at Newcastle, but he wants full control over the transfers the club make.
Murphy believes that Benitez is the right man for Newcastle, but he does not believe he should be given a huge budget - as the quality is already in the squad to get the Magpies out of the Championship.
“Newcastle need someone like him, who’s prepared to do the lot,” Murphy said.
“If he stays in charge they come straight back up.
“I think you have to be careful on what you give him to spend. There can’t be a free reign. [They need] three players max. They have enough quality.”
Newcastle only gave Benitez 10 games to save them from relegation this season, and it is widely regarded that if he had been given more time he would have saved them from the drop.
Benitez sparked a massive improvement from the Tynesiders, but it was not enough to get them out of trouble, due to the form of Sunderland.
Newcastle ended up finishing two points behind their North East rivals, and in 18th place in the Premier League table.
Benitez is expected to make his mind up over whether he will stay at Newcastle within the next few weeks.