The cancellation of Queensland's iconic Birdsville Races due to COVID-19 restrictions will have a far-reaching impact for many of the state's outback towns.

The scratching of Queensland's iconic Birdsville Races will affect many outback towns relying on tourists travelling to the event.

The races, known as the Melbourne Cup of the outback, are a major tourist drawcard for operators in the state's far west.

Diamantina Shire Mayor Robbie Dare says country towns between Birdsville and Queensland's major cities will continue to lose much-needed income from tourism as the races become COVID-19's latest victim.

"People come from all over Australia - it's the service stations, caravan parks, motels, in all the country towns that swing off Birdsville," Mr Dare told AAP on Monday after organisers announced the cancellation.

"It adds up to millions and millions of dollars."

The races usually attract more than 7000 visitors to the tiny township - which has a population of just 115 - near the South Australian border.

It's the latest event to be cancelled with July's Big Red Bash - attended by about 9000 people in 2019 - called off earlier this year.

Mr Dare, who also owns the Bedourie motel and roadhouse, says businesses are struggling, but the government's JobKeeper allowance is helping.

"It's a real battle," he said.

"If it wasn't for the government grant we'd be buggered."

Queensland's outback relies heavily on tourism between March and October when the industry is estimated to bring in about $500 million.

"So the whole outback is going to be about $500 million worse off this year," Mr Dare said.

Birdsville Hotel general manager Ben Fullagar says it's disappointing, but understandable, the races have been cancelled.

But he's calling on Queenslanders to support regional tourism when local travel restrictions are lifted.

"There's no better place to practice social distancing than on the edge of the Simpson Desert," Mr Fullagar told AAP.

The Birdsville Races, staged in the desert, were to be held on September 4 and 5.

"It is with heavy hearts that we have made the difficult decision not to stage the Birdsville Races this year," Gary Brook, Vice President of the Birdsville Race Club said on Monday.

"As much as we were holding onto the hope that we could run them, we're at a point where we've had to concede defeat.

"The health of our patrons, and those who live in Outback Queensland, is of paramount importance to us - and it is impossible to know what the status with COVID-19 will be come September," he said.

The event has been held since 1882. The last time it was cancelled was because of an equine influenza outbreak in 2007.

The races recorded its largest ever attendance the following year, and organisers are hoping 2021 crowds will make new records.

"Racing has a key role to play in driving Queensland's post-pandemic tourism recovery and we look forward to seeing Birdsville return bigger and better in 2021," Racing Queensland CEO Brendan Parnell said.