"[The risk of recession] currently stands at the greatest probability since the global financial crisis," he said.

RBA governor Glenn Stevens... The RBA could begin cutting official interest rates in November, Goldman Sachs predicts. Credit:Glenn Hunt

While Australia's GDP grew at 0.2 per cent in the second quarter of 2015, staving off concerns of an immediate recession, data flowing in from the third quarter was "far from robust", Mr Toohey said.

"In particular, the contraction in retail sales in July, sharp declines in equity markets and a tightening in financial conditions do not bode well for the remainder of 2015."

Goldman Sachs also slashed its target for the Australian dollar, forecasting it to fall to US67¢ within the next six months, down from a 12-month range.