At the market close, the benchmark S&P/ASX 200 index was down 112.80 points or 1.89 percent at 5,847.80, while the broader All Ordinaries index was down 119.60 points or 1.97 percent at 5,959.90.
The Aussie share market partially recovered after opening more than 3 percent lower, however energy stocks remained a significant weight and most other sectors posted modest losses.
"Investor concern is growing for the potential of a second wave with evidence in the U.S. of several states experiencing spikes in new cases as lockdown restrictions ease," Commsec Market analyst James Tao said.
"Markets are also still responding to caution by the U.S. Federal Reserve in terms of the expected pace of the economic recovery."
In the financial space, Australia's big banks slumped with the Commonwealth Bank down 1.64 percent, ANZ down 2.83 percent, National Australia Bank down 2.52 percent and Westpac Bank down 3.30 percent.
Mining stocks were mostly lower with BHP down 2.10 percent, Fortescue Metals down 0.47 percent and Rio Tinto down 1.06 percent, however goldminer Newcrest was up 0.17 percent.
The country's oil and gas producers plummeted with Oil Search down 5.73 percent, Santos down 3.57 percent and Woodside Petroleum down 5.28 percent.
Australia's largest supermarkets varied with Coles up 0.51 percent, and Woolworths down 0.38 percent.
Meanwhile telecommunications giant Telstra dropped 1.86 percent, the national carrier Qantas slumped 3.02 percent and biomedical firm CSL edged lower 0.18 percent.
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