Stock markets are downgraded because of the latest economic data and the potential for a major financial crisis.
Inflation and unemployment are also increasing.
The latest data released by the Australian Bureau of Statistics shows the unemployment rate is at 9.5 per cent and inflation is at a staggering 17.9 per cent.
The ANZAC Index is down 6.8 per cent, while the Dow Jones Industrial Average is down 7.9.
However, there are some positive developments in the stock markets.
The BHP Billiton stock index has dropped 5.4 per cent in just over two months.
The shares have dropped more than 100 points since August, when the government announced the end of a $1.2 billion taxpayer subsidy to the mining giant.
Meanwhile, the Sydney market has fallen 6.7 per cent this year, according to FactSet.
There has also been a drop in the Sydney property market.
Australia’s largest housebuilder, ASX-listed ASH, has recorded a loss of $8.4 billion this year on revenue of $21.7 billion.
It is expected that the downturn in the market will be compounded by the impact of a new mining tax and other tax measures.
As a result of the financial crisis, a number of companies have also cut their workforce.
The number of Australian workers employed by companies with a turnover of more than $1 billion fell by 4,700 to about 8,200 in the first half of this year.
According to data from the Australian Chambers of Commerce and Industry, more than 200,000 people lost their jobs last year, with the unemployment rates for those who lost their job rising by almost one percentage point.
This year the unemployment number has been steadily rising since mid-March, when a surge in new arrivals from China was blamed for a drop of more then 50,000 jobs.
“As the economy slows down, the government will be forced to take the tough decisions that will ultimately lead to a financial shock that will have a devastating impact on our society,” said the Treasurer, Scott Morrison.
For the full report visit the ABC’s Business section.