Goldman Sachs JBWere says Australia could be in recession for the first time in 17 years by Christmas.
Chief economist Tim Toohey told ABC TV on Sunday that September quarter economic indicators point to a continuing deterioration in growth on the back of a very weak June quarter.
He said a recession was "quite likely" by Christmas. A recession would be the first since a period of economic expansion began 17 years ago.
Mr Toohey also said any recession was likely to be relatively short by historical standards as the Reserve Bank continues to cut interest rates and a $A10.4 billion government stimulus package takes effect.
He predicted a further reduction in the official cash rate of 1.5 percentage points to 4.5% by March 2009.