The Australian share market closed sharply lower, dragged down by weaker banks and miners as concerns about the global outlook hampered investor appetite for risk.

The benchmark S&P/ASX200 index was down 85.2 points, or 1.88 per cent, at 4,455.5 points, while the broader All Ordinaries index had eased 83.3 points, or 1.83 per cent, to 4,479.7 points. On the Sydney Futures Exchange, the September share price index contract was 85 points lower at 4,422 points on volume of 39,807 contracts.

The US Federal Open Market Committee (FOMC) said overnight that the pace of recovery in US output and employment had slowed in recent months.

The US central bank, the US Federal Reserve, said it would reinvest cash from maturing mortgage bonds rather than shrinking its portfolio, essentially resuming crisis-era spending. The Dow Jones Industrial Average closed down 0.51 per cent, while the broader S&P 500 index closed down 0.60 per cent.

Commonwealth Bank on Wednesday said it increased annual profit by 20 per cent and would retain conservative capital and liquidity settings, given the uncertain environment. Shares in Australia's biggest bank were down $1.55, or 2.96 per cent, at $51.19. The other major banks were lower on Wednesday, with ANZ down 45 cents at $22.18, National Australia Bank had lost 61 cents at $23.89, and Westpac fell 86 cents, or 3.69 per cent, at $22.42.

Shares in Computershare slumped $1.06, or 10.6 per cent, to $8.94 after it said earnings could fall as much as 10 per cent in the current financial year. Also making news on Wednesday, property developer Stockland reported a 10 per cent lift in full year underlying profit and said growth was on the cards in fiscal 2011.

Stockland was down four cents at $3.75. Major mining stocks were weaker. BHP Billiton was down 75 cents, or 1.84 per cent, at $39.98 and Rio Tinto lost $1.51, or 2.08 per cent, to $71.09. Santos was the best performer in the S&P/ASX50, with the gas and oil explorer rising 22 cents, or 1.61 per cent, to $13.85.

The spot price of gold in Sydney was $1,199.30 per fine ounce, up $0.37 from Tuesday's local close of $1,198.93. Gold miner Newcrest fell 65 cents to $34.24, while its takeover target Lihir Gold was down nine cents at $4.23 on volume of 30.17 million shares.

The most traded stock by volume was oil and gas explorer Stirling Products, with 73.44 million shares worth $907,425 changing hands after the company announced the completion of a key transaction.

Shares in the animal healthcare company were up 0.1 cent, or 9.1 per cent, at 1.2 cents. Preliminary market turnover was 1.98 billion shares worth $6.54 billion, with 282 stocks up, 738 down and 351 unchanged.

The Australian dollar was lower late Wednesday as global financial markets breathed a sigh of relief after the U.S Federal Reserve announced measures that would ensure its balance sheet maintained its current size for now. Government bonds were stronger, reflecting weakness in equity markets locally and in Asia.

A deluge of Chinese data through the Asia session largely failed to impact the Australian dollar, while little attention was paid to news of a further rebound in Australian consumer sentiment in August.

The Australian dollar was quoted at $0.9076, down from $0.9115 late Tuesday. Against the Japanese yen, the Australian dollar was at 77.39, down from 78.30.