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Zombies take their medicine as some companies accept reality

The states with the biggest rise in administrations were Victoria, which recorded a jump of 23.8 per cent in September following a 49.3 per cent decrease in August, and Queensland, which recorded a 24.1 per cent increase in September after a drop of 25.4 in August.

NSW fared better, recording a 1.6 per cent decrease in business administrations, following a 34.3 per cent decrease in August.

CreditorWatch chief executive Patrick Coghlan said that while average payment times were down 10 per cent to 38 days, the backlog of company administrations was starting to make its way through the economy.

Accepting reality

“Payment times are usually a leading indicator but we are now seeing the first part of a backlog of insolvencies starting to be processed,” Mr Coghlan said.

“Seeing businesses enter into administration is never something you want to celebrate. However, September’s increase in default and administration rates does indicate that some businesses which have been reliant on government support are starting to accept the reality of their situation and are taking steps to settle with their creditors.

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

“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.”

The Reserve Bank reported in its semi-annual Financial Stability Review last Friday that government supports, particularly temporary insolvency relief, had reduced the number of business failures by about 4600 so far and would rescue more than 10,000 firms in total.

However, last week’s budget shifted away from supporting unviable firms with schemes such as the $102 billion JobKeeper wage subsidy and instead offered tax relief for businesses that have a better prospect of surviving in the new COVID-19 economy.

Industry experts say thousands of small businesses could still fail because they are unlikely to be able to pay employee entitlements required under the Morrison government’s proposed new insolvency restructuring laws.

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Why we must accept it won’t happen

As 2020 slides into and probably infects 2021, try to take heart in one discomfiting fact: Things are most likely never going “back to normal.”



a group of people walking down the street: People wear protective face masks while shopping at the Union Square Greenmarket as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 26, 2020 in New York City. The fourth phase allows outdoor arts and entertainment, sporting events without fans and media production.


© Noam Galai/Getty Images
People wear protective face masks while shopping at the Union Square Greenmarket as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 26, 2020 in New York City. The fourth phase allows outdoor arts and entertainment, sporting events without fans and media production.

It has become a well-worn phrase our politicians, officials, experts, even family, like to lean on — an ultimate, elusive prize.

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Perhaps it’s nostalgia for the world of January, a place where daily life more closely resembled our past decades. Perhaps it’s a bid to show control, to revert to a time when change was not so universally imposed upon us.

But January is long gone, and it’s not coming back. And, psychologists will tell you, that’s only bad if you can’t come to terms with it.

We are slowly learning if this year’s changes are permanent. If work — for the lucky among us — will remain from home. If we will visit the grocery store less but spend more. If we will find wearing a mask on the metro to be just part of life. If shaking hands and embracing will become less common. If most of your daily interactions will occur via video conference (rather than in person).

“Five years’ change in six months” is a common slogan for the pandemic. The disruption has upended lives in jobs lost and relatives who live alone or perhaps died without saying the right goodbyes.

Yet permanently severing ties with January is not necessarily a bad thing, psychologists say. The danger comes from hankering for normalcy again, rather than getting on with working out how to deal with whatever is ahead.

“Politicians who pretend that ‘normal’ is just around the corner are fooling themselves or their followers, or perhaps both,” said Thomas Davenport, the president’s distinguished professor of information technology and management at Babson College in Wellesley, Massachusetts.

“People who suffer tragedies eventually return to their previous happiness level,” Davenport said via email. “But I think that COVID-19 is a little different, because we keep expecting it will end soon. So there is no need to permanently change your attitudes about it.”

The human tendency to believe change is temporary and that the future will again resemble the past is often called “normalcy bias.”

People who don’t adapt to change believe what they remember as “normal” will return, and delay modifying their daily routines or outlook. Those who refuse to wear masks may be guilty of normalcy bias, Davenport said, since they perceive this intrusion into lives as a passing fad they don’t need to embrace.

Hardwired to adapt

The brain’s circuitry does prefer to survive, however: While part of our minds may be inclined to resist change as we feel disasters are a passing event, another