Australia is at increasing risk of following other major economies into recession in 2009, a survey released by the Westpac-Melbourne Institute indicated Wednesday.

The government has said Australia will experience lower growth and higher unemployment as a result of the global economic crisis but is well-placed to avoid a contraction.

However, Japan and Europe's largest economy Germany have already fallen into recession and the US and Britain are on the brink. Meanwhile, growth in China, Australia's largest trading partner, is likely to slow amid the global slump.

The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity in three to nine months into the future, fell sharply to 1.1 percent in September from 3.5 percent in August.

"This is a very disturbing fall," Westpac's chief economist Bill Evans said, adding that the August to September drop was sharper than any monthly fall seen during the last recession in Australia.

"The growth rate is signalling a very weak growth outlook through at least the first half of 2009.

"It is consistent with Westpac's view that growth in the first half of 2009 will be barely positive with a decent risk that the first two quarters of growth in 2009 could be negative."

Australia, which last pitched into a recession in 1990-1991, would be deemed to be in a recession after two consecutive quarters of negative growth.

The fall in the leading index in September was the largest monthly drop since the mid-1980s and Evans said it raised the prospect of a further interest rate cut in December.

The central Reserve Bank of Australia (RBA) has slashed its official cash interest rate by 200 basis points since the beginning of September and the rate now stands at 5.25 percent.

The RBA's assistant governor of economics Malcolm Edey said these cuts, combined with a 10.4 billion dollar (6.7 billion US) fiscal stimulus package from the government, will cushion the economy from the worst of the crisis.

Edey played down the prospect of a recession in Australia, but acknowledged that the global environment was rapidly changing.

"We are forecasting growth to trough at 1.0 percent so I just reaffirm that that is the number that we are working with," he told a conference in Sydney.