The ACT Council of Social Services has called on the federal government to scrap the "heartless" reduction of JobSeeker.
According to research from Deloitte Access Economics conducted for the Australian Council of Social Service, cuts to Job Seeker could lead to up to 40,000 Canberrans living under the poverty line.
The research also suggests the cuts to JobSeeker could result in the loss of 1,120 full time equivalent jobs in Canberra by the 2021-22 financial year, reduce consumption per person by $503 and economic output per person by $382.
ACTCOSS chief executive Dr Emma Campbell said JobSeeker had changed the lives of welfare recipients.
"The cuts to JobSeeker that will take it to the lower level is heartless and disgusting," Dr Campbell said.
"The introduction of the $550 per fortnight Coronavirus Supplement from April 27 to September 24, 2020 saw JobSeeker, formerly Newstart, rise above the poverty line by $105 per week - finally becoming adequate to meet basic living costs.
"[JobSeeker recipients] have been able to put fresh fruit and veg and meat on their meal tables for the first time in months.
"They've been able to afford their rent, they've been able to catch up on bills, they've been able to pay for medicine and health treatments."
Dr Campbell said people on low incomes are more likely to spend money when they receive extra income, which in turn strengthens the economy.
"They invest in the economy because they buy new clothes, they get things fixed, they buy food, they buy essential items they couldn't afford," she said.
"It makes economic sense and it makes moral sense to make sure people are kept out of poverty."
An ACTCOSS survey of welfare recipients in the ACT found 52.7 per cent of 495 respondents said the decrease of the supplement would have a significant impact, making it much harder to pay for rent and essentials.
JobSeeker is a payment supplement of $550 a fortnight on top of other welfare payments such as Newstart.
The federal government has said the supplement will decrease by $300 to $250 per fortnight on September 25.