Prime Minister Scott Morrison announced on Friday afternoon that local government will not be able to apply for the program launched on Monday, which gives other organisations $1500 in fortnightly wage subsidies per worker.

Instead, Mr Morrison said that local government will be provided with support by the state government.

However, Wagga councillor Vanessa Keenan said it was "completely shocking" that the program did not extend to the more than 600 people employed by the city's council.

These workers include ushers at the civic theatre to librarians and casual workers at the Oasis Aquatic Centre.

Read more:

"Just because you work in the local library or the local pool doesn't mean you are any less deserving," Cr Keenan said.

"The council is one of the largest employers in Wagga, but when you look at those smaller regional communities as well - the local council is the largest employer.

"It is shocking that (the federal government) are not looking to ensure these people can come back to work when those services and facilities reopen."

Wagga council was forced to close the doors on many of its services as a direct result of the COVID-19 pandemic, which includes the art gallery, library, civic theatre, museums, aquatic centre and zoo.

"My understanding is ... council has been as good as they can be in this situation in providing as much support as possible, but the fact those people aren't eligible (for the wage subsidy) due to the fact they work for local government is mind-boggling," she said.

Cr Keenan said councils were at the forefront of "generating rapid economic growth and jobs," but there has been a "distinct lack of stimulus" for communities through local government.

"There are willing and able workers and communities in desperate need of adequate funding, let alone increased funding, and here is a fantastic opportunity to do that," she said.

Local Government NSW president Linda Scott said Mr Morrison must reverse the decision to deny JobKeeper payments to councils.

She said without it, the first impact will be the closure of council-run childcare centres throughout the state.

"That's really bad news because local government is not only the largest provider of childcare and early education services in NSW - in some regional areas it is the only provider," she said.

"It is absolutely critical that councils have access to the JobKeeper assistance package, not just to help them keep their childcare centres open but to keep council staff employed.

"Councils want to keep as many staff in jobs as possible, so we can do our bit in keeping our local economies running."

We have removed our paywall from our stories about coronavirus. This is a rapidly changing situation and we aim to make sure our readers are as informed as possible. If you would like to support our journalists you can subscribe here.