A physical fair is unable to happen with COVID-19 restrictions, so a 'Shop Local & Win' campaign will be happening instead, with locals encouraged to spend money in the town's businesses to potentially win prizes.

Event organisers have requested $12,000 in sponsorship funds from the council to put towards this campaign, which councillors will vote for or against at Wednesday's meeting.

The council's economic development manager Charlotte Hoddle listed in the October papers that the campaign would see estimated benefits of "a minimum of $400,000 and up to $1,000,000" for the retail sector.

"Based on similar Christmas campaigns with significant investment of advertising and promotion, it can be expected there will be a sales uplift of between two-five per cent across the Gunnedah shire economy for the period of the campaign," she wrote.

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Ms Hoddle wrote that it would be beneficial if the $12,000 be taken from action item 2.2 of the council's COVID-19 Business Recovery Package - Invigorate Gunnedah, which listed the fair as a way to "bring vibrancy back into the CBD".

Under this plan - before the actual event was cancelled - the council would increase its yearly sponsorship of the event from $6000 to $12,000.

"Supporting local spending was another key objective of the Invigorate Gunnedah package with a 'Shop Local' campaign planned by council in the lead-up to Christmas ... with $7,000 allocated to this action item," Ms Hoddle wrote.

"It is reasonable to expect that the chamber's campaign would replace this campaign which could see the $7,000 allocated to this project get returned to the General Fund."

Regardless of what the councillors decide, Ms Hoddle wrote in the papers that it was "pleasing to see the innovative approach that the chamber has taken to promote local spending during the retail sectors busiest trading period".

"The retail sector has been hit hard by prolonged period of drought and more recently the impacts of the COVID-19 pandemic [and] an uplift in the retail sector will see flow-on impacts to the wider Gunnedah shire economy," the papers read.

"We have the potential to attract shoppers from across the region and thereby have the potential to create a 'day out' in Gunnedah with customers expected to support other services outside of the retail sector while they are in town.

"There is also the potential to change regional shopper spending habits if they discover a great retail experience in Gunnedah, they may become repeat customers to our shire."

The grand prize of the shop local campaign is a MG3 car from Gunnedah Automotive, valued at $14,000.

In the lead-up to the grand prize, every week until Christmas there will be additional chances to win prizes that have been donated by the local business community.