Some firms call it a day as reality bites

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

There are signs that some Australian businesses that have been propped up by government support measures during the coronavirus pandemic are calling it a day.

New figures show the number of businesses entering into administration rose 11 per cent in September, the first increase since June.

At the same time, the number of business defaults also saw the first increase since May, up by 23 per cent, according to digital credit reporting agency, CreditorWatch.

CreditorWatch CEO Patrick Coghlan said the figures suggest that some of the so-called 'zombie' businesses that have been reliant on government support for survival are waking up to the reality of their situation and shutting up shop.

"The long term-trend is that zombie companies will continue to survive on government support and so the next six months are crucial in determining what position we start our economic recovery from.," he said.

"What we don't want to see is businesses that are doomed to fail continuing to operate and taking healthy companies down with them."

Victoria recorded a 23.8 per cent increase in business administrations in September, following a 49.3 per cent decrease the previous month.

Queensland also recorded a 24.1 per cent rise in business administrations last month, following a drop of 25.4 per cent in August.

However, NSW recorded a further 1.6 per cent decrease in September, building on the 34.3 per cent fall in August.