Proposed federal welfare changes had prompted a spike in suicides in Tasmania and concerns that homelessness would also rise, the state's Mental Health Council said.
The proposed changes would force jobseekers to apply for 40 jobs a month and would prevent unemployed people aged under 30 from accessing benefits for six months.
Tasmania already had the highest suicide rate in Australia after the Northern Territory.
The council's Darren Carr said welfare changes, along with declines in the mining and forestry industries, was behind the rise in the number of suicides.
"We also know that threatened loss of income does lead to suicide and we understand there has been a spike in suicides following announcements of welfare cutbacks in the federal budget," he said.
The council was also concerned about the impact of public service job cuts in Tasmania.
In the state budget released last month, the Government announced plans to cut 700 public service positions, with 500 of those jobs to go in the first two years.
Mr Carr said job losses could be devastating.
"Anything that leads to a loss of people's employment is likely to have an impact on firstly increasing rates of mental illness and secondly on increasing rates of suicide," he said.
He has urged employers to provide counselling services to sacked staff.
Tasmania's suicide prevention plan is set to expire this year but the council says the State Government has pledged to develop another one.Homelessness expected to rise
A Hobart City alderman says the changes to the welfare system could cause increase homelessness in the city.
There were about 700 homeless people living in the Hobart region, and over the past year the council helped distribute 500 survival packs including first aid equipment, toiletries and warm clothing.
Alderman Bill Harvey said he was expecting the council would have to offer a lot more help if the proposed welfare changes came into effect.
"Those sort of unrealistic expectations may cause a spike in homelessness, I hope I'm wrong but I have concerns," he said.
"People who are on low incomes, people who are on welfare and that any changes that the federal government implement that affect welfare recipients may lead to a spike in homelessness."
The council had also installed 34 lockers for homeless people to safely store their possessions and trained 90 parks and bushland staff to be aware of their plight.
Alderman Harvey said he was worried that despite the council's work, the problem was likely to get worse.
"I do have concerns that federal government changes increase the number of homelessness," he said.
"I'm hoping we don't see a spike but I'm thinking we might in some of the federal government initiatives like unrealistic expectations that people need to apply for 40 jobs every month, that could lead to people being put off welfare."