The falls followed news that the US House of Representatives had rejected a $US700 billion ($860 billion) plan to rescue the financial system.

The S&P/ASX 200 Index closed 206.9 points, or 4.3pc, lower at 4600.5, its lowest finish in nearly three years.

At the opening, the index dropped by as much as 5.6pc, wiping more than $60 billion in value off the market.

Of the notable agribusiness stocks, AWB lost 6c to close at from $2.78; AACo has dropped from $2.82 to $2.70; ABB Grain provided a rare highlight gaining 11c to stand at $7.91; Nufarm lost 6c to close at $15.15 despite being as low as $14.92 this morning; Graincorp was one of the worst hit losing 50c to be trading at $7.50; and Futuris has lost 7c to stand at $1.41.

The biggest drag on the index came from global miner BHP Billiton, which shed a massive 9.5pc, or $3.24, to $31.00.

Its takeover target Rio Tinto plummeted 12pc, or $11.00, to $84.50, its lowest in more than two years.

Fortescue Metals slumped 94 cents, or 17pc, to $4.66.

Banks were also savaged badly, even though some shares survived the day fairly unscathed.

Among worst hit was Westpac, losing $1.67, or 7.2pc, to $21.48. Commonwealth Bank dropped $1.25, or 2.9pc, to $42.62, NAB shed $1.43, or 5.6pc, to $24.26, while ANZ lost just 4 cents, or 0.2pc, to $18.75.

Investment bank Macquarie Group fell 20 cents, or 0.5pc, to $37.00 and its rival Babcock & Brown plunged 40.5 cents, or 17pc, to $1.945.

After lunch CommSec markets analyst Juliette Saly forecast the market was on track to a record one-day fall.

"It could end up being one of the top-five worst days we've ever had on the Australian share market," Ms Saly said. "There's not a lot of support at all."

Futures had indicated a fall as much as 7pc. This morning only four stocks out of 200 were trading higher.