Prime Minister Scott Morrison and Minister for Families and Social Services Anne Ruston made the announcement on Tuesday.

The pair announced that the supplement, that was set to end in December, would be extended until March 2021 but would be decreased a further $100. The government had already cut the supplement from its original $550 rate down to $250 in September.

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The Prime Minister told reporters that as the country begins to bounce back from the pandemic it couldn't allow social security to hold people back from seeking work.

"My number one priority is to get more Australians into work," Mr Morrison said.

"As the country is safely reopening and businesses starting to return to full steam, we need to connect those seeking work with available jobs."

TasCOSS chief executive officer Adrienne Picone said continued cuts to the supplement didn't make economic sense.

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"The fact is that amidst the worst economic recession since the 1980s, the Federal Government has made the inhumane choice to consign millions of Australian to life below the poverty line," she said.

"And they are seemingly doing it by a thousand cuts, creating even more disruption and uncertainty in tens of thousands of Tasmanian lives already turned upside down by this health crisis.

"Plunging 40,000 Tasmanians into a life below the poverty line on 25 September was bad enough, to continue cutting the remaining payment undermines the right of every person to live with dignity."

Liberal Bass MHR Bridget Archer, who has been outspoken about the need for a permanent increase in the JobSeeker rate, said the extension of the supplement was welcomed.

She hoped the announcement would curb some of the anxiety felt by people on the payment.

"I think it is positive that we have at least some extensive time and an extension of the coronavirus supplement albeit at a tapered rate," Ms Archer said.

Ms Archer said the status of a permanent increase to the JobSeeker rate was still unclear. She said the discussion around social security needed to extend beyond a monetary figure.

"I'll still be advocating strongly for an increase in the permanent rate as well as what I have said for a long time which is looking at the welfare system more broadly and a range of things that sit around the JobSeeker payment - mutual obligations and the requirements of people that are seeking work. Are we doing enough to assist people to get into work?," she said.

She said she had not seen any empirical evidence to support claims people were not returning to work due to the JobSeeker payment.

"I think it is very simplistic to suggest people aren't taking up job opportunities just because they are getting paid too much JobSeeker allowance," Ms Archer said.

I think that is a simplistic view and I think if we are serious about helping people to get into work we need to look at what are the barriers that people are facing."

Ms Archer encouraged Tasmanians to reach out to her office and share their stories of living on the JobSeeker payment.

Greens Senator for Tasmanian Peter Whish-Wilson condemned the government's decision to cut the coronavirus supplement.

"We call on the Government to increase JobSeeker permanently so that it is above the poverty line.We're not a country that should relegate those forced into unemployment to live below the poverty line," he said.

"It doesn't make economic sense during a time of recovery and it's not fair. There will be so many out there depending on this supplement who will now find themselves at Christmas time struggling to make ends meet."

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