And with one job for every four people searching for work in Canberra, ACT parliamentarians and advocates are leading calls for the cuts to be abandoned.

One MP has even suggested the $688 million homeBuilder scheme should be abandoned, with the money repurposed to keep JobSeeker at a "liveable" level.

The number of people in the ACT receiving JobSeeker and Youth Allowance has increased 124 per cent in the six months to June.

More than 12,000 Canberrans are now relying on the unemployment payment.

But from September, the $550 per fortnight JobSeeker coronavirus supplement will be slashed to $250.

It will mean the total JobSeeker payment will be reduced to $815.70 for singles with no children and $760.80 for people with partners.

Before the pandemic, the base welfare payment was $565.70 per fortnight for a single person with no children or $510.80 for a person with a partner.

For JobSeekers with children, it means their payment will fall from $1162 per fortnight to $862.

Australia Institute senior economist Matt Grudnoff said the introduction of the coronavirus supplement in March lifted 425,000 Australians out of poverty in one day - the fastest boost to living standards in Australian history.

The reduction of $300 per fortnight would push 4000 Canberrans, including 1000 children, back over the poverty line, Mr Grudnoff said.

"It's a lot of people going into poverty," Mr Grudnoff said.

Mr Grudnoff said the number of children affected was particularly concerning.

"The impacts of poverty can last your whole life. If you experience a period of poverty while you're young, the consequences can stay with you through your whole life even if you move out of poverty," Mr Grudnoff said.

"Your cognitive development can be delayed so you're more likely to struggle in school and are unlikely to achieve your full academic potential. That means you're likely to have a less well-paying job, and more likely to be marginally attached to the labour market, in other words unemployed.

"It affects your emotional development and physical development. Things like diabetes, heart disease and poverty are linked to bouts of poverty in children. This is independent of what happens later in life. And the longer you're in poverty, the higher the chance [of developing these health conditions] is."

ACT Council of Social Services chief executive Dr Emma Campbell said the figures confirmed their worst fears about the JobSeeker cuts.

"High averages in the ACT do not reflect the reality for many individuals and families in Canberra who are living at or below the poverty line," Dr Campbell said.

"The reduction to JobSeeker and other income support payments has created distress and anxiety for the many thousands of Canberrans who have lost their jobs.

"Many people are telling us they need every cent they are currently receiving in order to cover the basics - housing, groceries, bills, transport. Cutting already low incomes by $300 per fortnight in September is deeply concerning."

Dr Campbell said the full coronavirus supplement should have been maintained until it was replaced with a "permanent, adequate payment".

"The government should not be cutting a temporary payment at a time of great uncertainty and insecurity," Dr Campbell said.

"While we note that the Prime Minister said today the supplement may be extended beyond the end of the year, what we needed from the government today was an adequate, permanent fix to income support.

"We needed the government to show people and businesses that it had their backs with the confidence to get through this crisis, through a permanent, adequate increase that guaranteed we would never go back to $40 per day."

Labor member for Canberra Alicia Payne said the pre-COVID rate of JobSeeker was "unliveable".

"The increased rate of JobSeeker has been truly transformative for families living below the poverty line across the country," Ms Payne said.

The Labor MP for Fenner, Dr Andrew Leigh, said the JobSeeker cuts would exacerbate inequalities exposed by the virus.

"Recessions always hit the poor the hardest and this one's no exception" Dr Leigh said.

He called on the government to redirect money from the HomeBuilder scheme to keep JobSeeker at a "liveable level".

"There's a need to make sure the government response to this crisis reduces inequality. HomeBuilder does not do that. If anything, HomeBuilder will be taken up by the most affluent. We need to ensure as we rebuild, we come back a more equal society," Dr Leigh said.

However Treasurer Josh Frydenberg said the changes were necessary to get people back into the workforce.

"Seeking up to four job searches a month I don't think is unreasonable, engaging with your employment services provider is not unreasonable," he said.

But some have also questioned whether the withdrawal of stimulus is too soon, given the uncertainty of the ongoing impact of coronavirus on the whole economy.

"Cutting the JobSeeker rate is not only morally wrong, but also a bad economic decision," Dr Campbell said.

"We know that people on low incomes spend their money on essentials supporting local businesses and injecting desperately needed money into the Canberra community."

Mr Grudnoff said according to the budget update, the fiscal support provided by government during COVID-19 is expected to increase the level of real GDP by around 0.75 per cent in 2019-20 and 4.25 per cent in 2020-21, compared to if no support was provided.

"The best form of stimulus is handing money out to those on low incomes, because we know they will spend it on the essentials of life. They will also spend it all, so it gives your stimulus maximum bang for buck."