Local stocks declined sharply from the start of trade with energy companies, miners and banks leading the falls.
At 12:30pm (AEST), the All Ordinaries Index had lost 2.5 per cent or 128 points to 5,065.
The ASX 200 Index fell 2.6 per cent or 137 points to 5,034.
There was red across the board.
Big miner BHP Billiton fell 3.3 per cent or $0.80 to $23.67, while Rio Tinto shed 3 per cent of its value or $1.54 to $49.72.
The Commonwealth Bank was down 3.2 per cent or $2.48 to $73.34, and Westpac lost nearly 4 per cent of its value or $1.22 to $30.53.
Oil and gas producer Woodside Petroleum shed 3.7 per cent or $1.11 to $28.61.
Retail and mining conglomerate Wesfarmers dropped 2.1 per cent or $0.87 to $38.33, while rival retailer Woolworths lost 2.5 per cent or $0.63 to $24.19.
Telstra was down $0.13 or 2.3 per cent to $5.52.
Qantas was one of few stocks to rise, increasing $0.02 to $3.65.
Credit reporting agency Veda gained $0.01 still boosted by a more than $US2.3 billion takeover bid by US rival Equifax.
The fall was prompted by a plunge on Wall Street after the US central bank, the Federal Reserve, said it was worried about the global economy and kept US benchmark interest rates on hold at near zero levels.
Asian markets were also mainly weaker in early trade.
The Nikkei in Japan fell nearly 2 per cent or 362 points to 18,070.
The Hang Seng in Hong Kong lost 1.3 per cent or 297 points to 21,623.
The Shanghai Composite Index in China was down six points to 3,092.
As the Fed’s commentary was absorbed during Friday’s trading session on Wall Street, the Dow Jones Index slumped 290 pints or 1.7 per cent to 16,385.
The tech heavy Nasdaq fell 67 points or 1.3 per cent to 4,827, and the S&P 500 dropped 32 points or 1.6 per cent to 1,958.
West Texas Crude oil weakened at $US44.68 a barrel and spot gold traded at $US1137.78 an ounce.
Tapis crude is at $US49.16 a barrel.
The Australian dollar was buying around 71.67 US cents, 63.36 Euro cents, 46.13 British pence, 85.86 Japanese yen, and $1.12 New Zealand.