When it was first introduced at the beginning of the COVID-19 crisis in March this year, the supplement - which is for people receiving eligible income support payments such as JobSeeker and youth allowance - was worth $550.

It was cut back to $250 on September 25 and now is due to be slashed by a further $100 on New Year's Day, before it's scrapped altogether on March 31, which Tasmanian Council of Social Service chief executive Adrienne Picone says will plunge many of the roughly 51,000 Tasmanians currently in receipt of the coronavirus supplement further below the poverty line.

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"At a time where Tasmanians are doing their level best to weather the social and economic impacts of COVID-19, [the Morrison government has] done the unthinkable," Ms Picone said.

"The federal government's short-sighted decision to cut income support programs further shifts the cost burden of caring and supporting Tasmanians while they look for work onto our state government and social assistance sector. When people don't have enough money to live on, it also puts more pressure on local services and local government to provide much needed support.

"Tasmanians simply trying to get by are well within their right to ask: does the federal government care?"

People on JobSeeker - formerly known as Newstart - receive a base rate of $565.70 a fortnight. Leading figures in the community services and welfare sector have long called for the rate to be increased, while former Reserve Bank governor Bernie Fraser told the Sydney Morning Herald on Wednesday that the payment needed to be increased by somewhere between 50-100 per cent.

Addressing the media earlier this week, federal Social Services Minister Anne Ruston stressed that the coronavirus supplement had been extended and to "construe it as a cut is not correct".

"It's an additional $3.2 billion of taxpayers' funds that will be supporting unemployed Australians for that three-month period, in addition to the support that they already get," Ms Ruston said.

State Opposition Leader Rebecca White said slashing the JobSeeker and JobKeeper supplements would mean that tens of thousands of Tasmanians would "begin 2021 with a significant pay cut and facing ongoing uncertainty".

"The reduction in these payments risks terrible consequences for the economy and for workers, with an estimated $33 million stripped out of the state's economy over the next three months," she said.

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