Already cash-strapped in the face of coronavirus, Australia's arts sector says it's been further devastated after dozens of organisations lost federal funding.

Melbourne's La Mama, the tiny 53-year-old company recognised as the birthplace of Australian theatre, is among 49 arts companies to lose funding from the Australia Council, the Government's arts funding body.

Other casualties are high-profile troupes for young people including the St Martins and Polyglot theatres in Melbourne, Barking Gecko in Perth, and Sydney's Australian Theatre for Young People, which counts Nicole Kidman, Baz Luhrmann and Rebel Wilson among its alumni.

Sydney Writers' Festival failed to secure funding, as did the Museum of Contemporary Art.

Theatre Network Australia executive director Nicole Beyer said the sector was "devastated and shocked so many companies have lost funding".

"This has happened because the Australia Council's funding has been frozen since 2013 — in fact it's been chipped away at by about $6 million a year," Ms Beyer said.

She said the loss of key funding would result in the closure of some smaller companies, while larger organisations would need to scale back their activities, cancel some programs or make up the money from elsewhere.

"The problem is, with the impact of COVID-19 as well, there's nowhere for them to get extra funding from," she said.

Australia Council funding is awarded every four years via a competitive application process, and organisations must reapply at the end of the funding cycle.

The council flagged these cuts last year, when, faced with limited funding, it decided to fund fewer companies, but give them more money.

Ninety-five organisations, including Indigenous companies Ilbijerri and Yirra Yaakin, were successful in securing funding and will receive up to $500,000 a year for four years from 2021.

La Mama chairman Richard Watts said it was the second blow for the theatre company in a year and a half, after its theatre was burned down by an electrical fire.

La Mama lost its Carlton theatre in a fire in 2018. ( ABC News: Danielle Bonica )

La Mama relies on the Australia Council for a significant proportion of its funding, but Mr Watts said the loss would not spell the end of the company, which has at different times been home to artists including Cate Blanchett, Jack Hibberd, Graeme Blundell, Judith Lucy and Julia Zemiro.

Industry calls for boost at 'perilous time'

In recent days the Australia Council has attempted to ease the pain of the almost-complete shutdown of the performing and visual arts sectors.

It redirected $5 million in funding towards a Resilience Fund immediately accessible to the sector, and it delayed the announcement of the four-year funding by a week while it sought to soften the blow.

It has done that by continuing some funding for an extra year, until 2022.

That means the 49 companies whose funding will ultimately be discontinued will receive a lifeline, in the form of a smaller amount of funding, for 2021.

The Australia Council funded this stop-gap with an additional $4 million saved from other activities and by asking the successful companies to absorb a 30 per cent reduction in their grant for 2021.

The executive director of the National Association for Visual Arts, Esther Anatolitis, said arts organisations needed their funding boosted rather than cut.

"Despite unprecedented whole-of-industry collaboration in outlining urgent needs for stimulus to prevent industry collapse, I am deeply concerned that those specific needs are not understood," she said.

"At this perilous time we should be increasing funding for the organisations that power the industry, not undermining their capacities."

Australia Council chief executive Adrian Collette said the arts had been dealt a particularly bad blow with the COVID-19 shut down, and they one-year stop-gap funding was an acknowledgement of that.

"We were working with the Government on a package that might have meant more for four-year funding, but in these circumstances [COVID-19] that was a conversation that really did get overwhelmed."

He acknowledged some companies would struggle to continue.

"There will certainly be some [companies] that will face insolvency and they're the ones we really have to focus on during the next three months or so," he said.