Labor is standing by calls to extend the JobKeeper scheme despite the Reserve Bank governor downplaying the need.
Philip Lowe expects some job shedding when the wage subsidy scheme ends in March, but insists it will be more of a blip in the economy than a fiscal cliff.
Shadow treasurer Jim Chalmers believes the economic hit will be far worse in places like Cairns, which are heavily dependent on international travellers.
"Cairns is on JobKeeper life support in many ways and the government's response is to pull the plug," he said on Thursday.
"That will be devastating for a lot of small businesses and workers and industries and towns which are still struggling.
"All we're asking is for the government to acknowledge, as the Reserve Bank governor did, that even though the recovery is under way many people are still struggling."
The Morrison government is adamant JobKeeper will end in March but is looking at targeted ongoing support in some sectors.
There are reports the government could introduce a HECS-style loan scheme for struggling businesses.
Companies hit by the recession would continue to receive taxpayer support, but the money would need to be repaid once their turnover recovered.
Dr Chalmers has not seen the proposal but is not convinced by the model.
"What's being looked at here is no substitute for JobKeeper, which is keeping a lot of places like Cairns and elsewhere alive during a really difficult time," he said.
"The government shouldn't be in a rush to cut it."
Australian Council of Trade Unions secretary Sally McManus believes the government should focus on the existing revenue downturn test for the scheme.
"That way you ensure that businesses that really need it are the ones getting it," she told Sky News.
She said while tourism needed help, higher education and manufacturing were other sectors still struggling.
"If you just go for one sector you can leave out other employers that are badly affected all because of the coronavirus," Ms McManus said.