Prime Minister Kevin Rudd said on Sunday it was now "virtually impossible" for Australia to avoid a recession given the global economic downturn.
Rudd said in a television interview that the global economic recession "is getting worse before it gets better", which meant Australia would have little prospect of sustaining growth in the near future.
The Australian leader was speaking before leaving on a major international tour on Monday, during which he will meet US President Barack Obama.
"It's clear that the impact of a worsening global economic recession will make it virtually impossible for Australia to sustain a positive economic growth for the period ahead, with impacts of course for budget and employment, which underlines the importance of global action in response to the global recession," Rudd told Channel Nine.
Australia's economy shrank 0.5 per cent in the fourth quarter of 2008, its first quarterly contraction since 2000, with consumer consumption notably subdued despite a generous helping of policy stimulus.
If growth is also negative in the current quarter, which ends this month, that would meet the technical definition of a recession, which is two consecutive quarters of negative growth.
Australia's last recession was in 1991.
Rudd added that the forthcoming budget would be "really tough" due to collapsing government revenues. Australia has already implemented two major stimulus packages in a bid to shore up its economy, while the central bank has been aggressively cutting interest rates to spur demand.
Australia's growth forecasts have been steadily downgraded in recent quarters as the global economy sank into recession, dragging down prices and demand for its major resource exports such as minerals and metals.