TRP25-02 Zombie businesses during the COVID-19 pandemic: Australia’s experience

In the COVID-19 pandemic, governments spent large sums of taxpayer money on directly supporting businesses. The risk is that this spending may have kept alive unprofitable firms that would normally have failed even without a pandemic. If these firms are kept alive without contributing to the economy, they consume resources that are better used elsewhere, and make the financial system less stable.

Because these firms live on for a while without any real or vibrant future, economists call them ‘zombie’ firms.