At closing bell, the benchmark S&P/ASX200 index tumbled 187.79 points, or 3.05%, to 5,960.64. The broader All Ordinaries dropped 189.76 points, or 3.03%, to 6,079.54.
The recent rally in equities has stalled following comments about the pace of the economic recovery by the US Federal Reserve chair Jerome Powell following the Fed's June meeting.
Investors assessed the Federal Reserve's forecast of a long road to recovery for the economy and loose monetary policy. The U.S. Federal Reserve on Wednesday opted to leave its interest rates unchanged and gave a gloomy outlook for the economy, forecasting the world's largest economy could shrink by as much as 6.5% this year before expanding by 5% in 2021. Fed Chairman Jerome Powell remarked that the central bank is "not even thinking about raising rates" and that interest rates are likely to remain near zero until the end of 2022. The central bank also said it will at least maintain the current rate of bond purchases.
Broad declines saw every sector close in negative territory. The financials and energy sectors were again hardest hit. Heavyweight financials were the biggest drags on the benchmark, with the 'Big Four' banks shedding between 4.4% and 6.2%.
Woodside Petroleum and Santos led a 5.4% decline in the energy sub-index, as oil prices slipped on concerns of slow demand growth and record US crude stockpiles.
Health stocks and gold miners outperformed with defensive names favoured in today's session. Gold is seen as a safe haven in times of uncertainty and miners such as Newcrest (NCM) and Saracen (SAR) both 5% higher while Northern Star (NST) rose 6.3%.
CURRENCY NEWS: The Australian dollar changed hands at $0.6944 after seeing an earlier high of $0.7004.
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