Economists are divided on whether the federal government should end JobKeeper in March as planned, but have warned against excessive spending cuts.

JobKeeper is currently subsidising the wages of 1.5 million jobs across roughly 500,000 businesses, and Treasury estimates about 100,000 workers will still be working zero or extremely low hours when the program ends on March 28.

Prime Minister Scott Morrison says the economic recovery is nonetheless well under way and businesses must now stand on their own two feet.

But unions and federal Labor say withdrawing support so early into the recovery will lead to a spike in unemployment.

JobKeeper is scheduled to end on March 28.

Days after Treasury secretary Dr Steven Kennedy told a senate committee that JobKeeper’s withdrawal would lead to some job losses, Australian Council of Trade Unions secretary Sally McManus told ABC’s Insiders on Sunday that the scheme should continue for businesses still affected by ongoing restrictions.

“What we say is that JobKeeper should be extended for those businesses that are still affected by the coronavirus. So [through] no fault of their own, they are suffering that downturn,” Ms McManus said.

“And we say that because that will save jobs.”

Ms McManus said tourism, aviation and parts of manufacturing were particularly hard hit, with certain pockets of the country, such as North Queensland, suffering extreme economic hardship.

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Her comments echoed those made by shadow treasurer Jim Chalmers during a visit to Cairns in January.

Dr Chalmers said international border closures were crushing the Cairns economy and the federal government should develop a targeted version of JobKeeper to help businesses in genuine need.

But economists who spoke to The New Daily said although ongoing support was necessary, other policies might be more appropriate than JobKeeper.

University of Queensland economics professor John Quiggin said higher education was one of the worst-affected industries but extending JobKeeper would do little to help it, as the rules of the scheme meant that most university employees were ineligible.

Instead, Dr Quiggin said the federal government should “abandon its culture war with the university sector and put in [place] proper funding”, while considering more targeted support for the tourism sector and folding JobKeeper into JobSeeker to boost benefits aimed directly at workers.

“If we’re going to continue with wage subsidies, we ought to be giving them to workers and making them portable, rather than tying them to a particular employment relationship that existed a year ago,” he said.

Labor politicians Murray Watt and Jim Chalmers held a press conference in Cairns last month urging the government to provide the town with more financial support.

Monash University economics lecturer Isaac Gross said the government should extend JobKeeper for struggling businesses if the challenges affecting them are temporary.

But if firms have no long-term future, the government should channel their support towards the broader community, rather than specific firms, and accept that some job losses are inevitable.

“[If] we don’t think we’re going to be seeing lots of overseas tourists heading back to Cairns in the near term, then I think you might want to shift away from saving specific businesses that just may not be viable for the next five years, and [instead] help out locations that have been broadly badly hit,” Dr Gross said.

“[That way], even if a worker may no longer be able to get a job in the tourism industry in Cairns, they can try and find a job in a different industry that’s still going.”

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Dr Gross said support packages for badly affected communities could include cash grants for businesses and local governments, as well as investment incentives and retraining initiatives.

He said an extended JobKeeper program with tighter eligibility requirements would also help, particularly if it could be turned on and off on a weekly basis in response to snap lockdowns.

But other economists, including Saul Eslake, believe another JobKeeper extension would do more harm than good, by trapping workers in unproductive firms.

“It sort of gums up the job market,” Blueprint Institute chief economist Steven Hamilton told The New Daily in January.

The Australian Bureau of Statistics will release the latest labour force figures on Thursday, and market economists expect the unemployment rate will fall from 6.6 to 6.5 per cent.