Authorities have recovered the bodies of 27 asylum seekers who died after their boat smashed into cliffs and sank off Christmas Island.

Up to 80 asylum seekers including women and children were onboard a wooden Indonesian fishing boat when it crashed near Flying Fish Cove this morning.

Customs says 41 survivors have been rescued from the water, while one person made it to shore.

It says it will search for survivors until last light tonight and will then decide whether to continue efforts overnight.

"Border Protection Command earlier deployed two assets - HMAS Pirie and ACV Triton - to render immediate assistance and conduct the rescue," Customs said in a statement.

"Ongoing investigations will be a matter for the Australian Federal Police and the West Australian Police, who will prepare a report for the West Australian coroner."

The asylum seekers are believed to be from Iran and Iraq.

Earlier the Royal Flying Doctor Service (RFDS) said it feared up to 50 asylum seekers had died.

Stephen Langford from the RFDS says three survivors have serious injuries, while about 30 others have moderate injuries. Most are being treated at the local hospital.

He says a RFDS plane is on its way to the island to stabilise the three critically injured patients and fly them to a Perth hospital.

"The general information we have is there's around 30 victims with moderate injuries that the hospital should be able to care for," he said.

"So far we know there are three patients - two with head injuries, one with some blunt abdominal trauma," Mr Langford said.

"I understand in the rough seas crashing up against the rocks, it was like a whirlpool or washing machine, and people were injured that way."

Mr Langford says it is hoped the plane will arrive tonight, but the rough conditions may make it difficult to land.

Prime Minister Julia Gillard is returning from leave after receiving briefings on the crash.

Ms Gillard has released a statement saying it will be some time before full details emerge.

"The Government's focus and absolute priority now is on rescue, recovery and treatment of those injured," she said.

Christmas Island residents rushed to the cliffs when they heard screams from offshore and threw life jackets and ropes into the water.

But they were forced to watch helplessly as bodies and wreckage were washed onto rocks.

Both the Navy and Customs have vessels involved in the ongoing rescue and recovery operation.

Acting Prime Minister Wayne Swan was able to give only limited details at a press conference this afternoon.

"A number of people have been rescued but sadly some bodies have been retrieved," he said.

"It is very difficult weather, very difficult conditions."

The Immigration Department has set up an information phone line for people who may know someone onboard the boat.

It says all calls will be treated confidentially and people may be able to help identify those involved in the incident.

The phone number is 1300 724 010.

'Like a washing machine'

Local electrician Michael Foster was part of this morning's rescue effort.

"We've got heavy seas and a swell of four metres plus and it's like a washing machine down there," he said.

"The only thing people could do from the mainland was really throw life jackets into the water or just advise [the passengers] to swim away from the rocks."

Mr Foster says the Navy sent out fast inflatable boats but they were unable to reach everyone in the surging seas.

"They had about four rescue vessels there trying to pull people out of the water, throwing them a lifeline and dragging them in," he said.

Christmas Island shire councillor Kamar Ismail says he saw at least two or three bodies in the water.

"I saw children hanging onto the side of the boat, just holding on," he told the West Australian newspaper.

"There were all others hanging onto rocks and what was left of the boat.

"Wave after wave was coming in and it was very, very rough. The rocks were very jagged and it's a very steep area around there."

Opposition immigration spokesman Scott Morrison described the incident as "our worst nightmare".

"This is a terrible tragedy and it's one I think will shock us all," he said.

"These are very dangerous waters and very dangerous coastline ... I think it's a miracle that people have survived."

Mr Morrison says the disaster would have been even worse without the "heroic" efforts of Christmas Islanders in the rescue.

He also echoed Mr Swan's earlier statement that it was inappropriate to debate immigration policy in the current circumstances.