The Australian stock market closed almost one per cent lower following steep falls on Wall Street.
At the close on Thursday, the benchmark S&P/ASX200 index was down 39.2 points, or 0.89 per cent, at 4,349.2, while the broader All Ordinaries index was down 40.1 points, or 0.91 per cent, at 4,370.6.
On the ASX 24, the December share price index futures contract was 45 points lower at 4,355, with 29,607 contracts traded.
RBS Morgans analyst Bill Chatterton said heavy falls in the US had dragged the local market lower.
"That's where the impact's coming from," Mr Chatterton said.
"There's talk of fiscal cliffs and the European situation is taking a lot longer than the optimists were hoping.
"We're dealing with reality really. The GFC hangover doesn't just fix itself up in four or five years."
Investors would need to brace for several more years of volatility, he said.
Comments by US President Barack Obama about raising taxes for the wealthy along with weak retail and manufacturing economic data there and in Europe have been cited as triggers for "risk-off" falls.
The Dow Jones Industrial Average dropped 185.23 points (1.45 per cent) to 12,570.95, its lowest close since June 26.
The "fiscal cliff" refers to the huge tax hikes and spending cuts that automatically come into force on January 1, and could send the world's largest economy back into recession, if US Republicans and Democrats can't reach a compromise.
Mining giant BHP Billiton fell 64 cents to $33.09, Rio Tinto dropped $1.00 to $56.85 and Fortescue dropped three cents to $3.97.
Three of the four major banks suffered heavy losses.
ANZ shed 13 cents to $24.07, Westpac lost 21 cents to $24.64 and Commonwealth Bank was 40 cents lower at $58.69.
National Australia Bank was the only bank to finish in the black, rising three cents to $23.27.
Qantas shares gained five cents, or 4.1 per cent, to $1.28 after it announced it would spend $100 million to buy back about four per cent of its issued stocks and would repay $650 million of debt ahead of its due date.
Seven Group shares closed 17 cents lower at $6.30.
The Sydney gold price was $US1,725.35, down $US2.88, from $US1,728.23 on Wednesday.
National turnover was 1.4 billion shares, worth $3.6 billion, with 262 shares up, 673 shares down and 347 unchanged.