Businesses will still be able to get financial support from the state government for a month after commonwealth funds dry up.
They'll be able to access payments until the end of November, provided they meet eligibility requirements.
The region’s peak business organisation Business Illawarra is welcoming the extension, but Executive Director Adam Zarth still has concerns over the long term.
"We've seen enormous hits to the hospitality and tourism sectors in the Southern Highlands and this can't be corrected overnight.
"For the Federal Government to withdraw support at the 80 per cent vaccination rate, is probably bordering on premature,''Mr. Zarth said.