At 12.00pm (AEDT), the benchmark S&P/ASX200 index was down 93.6 points, or 2.68 per cent, at 3393.2
The broader All Ordinaries index had fallen 86.9 points, or 2.53 per cent, to 3345.
IG Markets research analyst Ben Potter said the materials sector was the worst performer on the local bourse followed by consumer discretionaries, industrials and financials.
"It's pretty ugly,'' Mr Potter said.
"We're in the depths of a bear market and no-one knows when it is going to stop.
"The materials sector is being hit heavily by concerns over the economies of our major export partners, Japan, China and South Korea.''
This followed news yesterday that China's GDP growth had slowed, as expected.
"It's not a healthy picture,'' Mr Potter said.
"Concerns about slowing demand for materials is being reflected in share prices and there are expectations these Asian economies will slow even further.''
At 12.03pm AEDT, mining giant BHP Billiton was down $1.10, or 3.77 per cent, at $28.04 while rival Rio Tinto retreated 70 cents, or 1.8 per cent, to $38.10.
Mr Potter said the domestic financial sector had been spooked by talks of bank nationalisation in the United Kingdom.
"It's doing nothing for confidence,'' he said.
At 12.05pm (AEDT), NAB had lost 58 cents, or 3.2 per cent, to $17.53 and Commonwealth Bank gave up 65 cents, or 2.54 per cent, to $24.95.
ANZ dropped 50 cents, or 3.85 per cent, to $12.50 and Westpac shed 49 cents, or 3.16 per cent, to $15.03.
In company news,Babcock & Brown says there will be no value remaining for shareholders under a revised business plan being discussed with the debt-laden investment firm's lenders.
The company remains in a trading halt entered into on January 8 when it last traded at 32.5 cents.
Energy stocks were weak. Woodside softened 78 cents, or 2.24 per cent, to $33.98 at 1208 AEDT, and Oil Search had shrunk seven cents, or 1.65 per cent, to $4.17.
The spot price of gold in Sydney was $US852.80 per fine ounce at 1209 AEDT, down $US0.10 on Thursday's local close of $US852.90.
The gold miners were mixed. Newmont was one of the few bright spots on the market at 12.09pm AEDT, up 12 cents, or 1.99 per cent, at $6.16, but Lihir fell 3 cents to $2.92 while Newcrest gave up $1.57, or 4.92 per cent, to $30.33.
On the Sydney Futures Exchange, the March share price index contract was 91 points lower at 3353 on a volume of 14,180 contracts.
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