Economists are warning that 200,000 jobs in Australia may go by the end of next year as the global financial crisis takes hold.
National Australia Bank economists predicted growth would drop to 1.25% by the middle of next year, with an interest rate cut to 4.5% and unemployment at about 6% by the end of the year, Fairfax newspapers report.
The bank's chief economist, Alan Oster, said the uncertainty over jobs could also lead to a quiet Christmas for retailers.
"I think Christmas is going to be a lot slower and weaker and then it will continue getting weaker into next year," Mr Oster said.
Professor Guay Lim, from the Melbourne Institute for Applied Economics and Social Research, said problems would occur if people decided to save instead of spending.
"We expect slow growth and an increase in unemployment," he said.
"People need to maintain a level of spending and buying Christmas presents. We cannot save excessively because the economy will go into a tailspin."