So far 109 people have been rescued, a figure authorities revised down from 110, and three are confirmed dead after the vessel which was believed to be carrying around 200 asylum-seekers capsized in the Indian Ocean.
But with more than 80 people unaccounted for, Home Affairs Minister Jason Clare said the prospect of finding anyone else alive was looking “increasingly grim”.
“A surveillance plane has seen more debris and lifejackets in the water. Some are floating on their own, some of them that have people wearing them, and they have identified more bodies in the water,” he told Sky News.
“Unfortunately, I can’t report that any more survivors were seen alive in the water at this time.
“We need to brace ourselves for more bad news. Potentially, many more people have lost their lives,” he added.
The survivors — all adult men except for one 13-year-old boy — were taken by ship to Christmas Island, a remote Australian territory near Indonesia’s Java where they were given medical checks.
Clare said one person was in a critical condition. Earlier reports said the ship was en route from Sri Lanka, although the minister told Australian radio there appeared to be mostly Afghans on board.
The ship issued a distress call and capsized 120 nautical miles north of Christmas Island, 2,600 kilometres (1,600 miles) from the Australian mainland on Thursday afternoon.
Christmas Island administrator Steve Clay told ABC radio that three of the survivors were admitted to hospital on their arrival, but the rest were in fair condition.
“They were transferred to the jetty, put into buses and transferred up to the Phosphate Hill immigration facility,” he said.
“They’re getting medical checks up there. They appear calm and they were just sitting quietly.”
Six ships and five aircraft are involved in the search and the Australian Maritime Safety Authority said they would continue looking until Saturday afternoon, when plans would be reassessed.
The capsize is the latest in a series of refugee boat disasters in the Indian Ocean in recent years, as rickety, overloaded vessels packed with desperate migrants struggle to reach Australia.
Though they come in relatively small numbers by global standards, asylum-seekers are a sensitive political issue in Australia, dominating 2010 elections due to a record 6,555 arrivals.
Afghanistan is the third-largest origin country for successful asylum seekers to Australia after Iraq and Myanmar, with 1,027 humanitarian visas granted in 2010-11 — 12 percent of the total.
Direct asylum-seeker journeys from Sri Lanka have historically been rare but navy sources in Colombo have reported a marked increase in Australia-bound people-smuggling operations.
Indonesia is a more common transit point for those trying to reach Christmas Island, but many fail to make their destination.
The UN’s refugee agency said it was “deeply concerned” by the incident.
“This accident again underscores the dangerous nature of these hazardous journeys, and the desperate and dangerous measures people will resort to when they are fleeing persecution in their home countries,” it said in a statement.
In December, a boat carrying around 250 mostly Afghan and Iranian asylum-seekers sank in Indonesian waters on its way to Christmas Island, with only 47 surviving.
Some 50 refugees were killed in a horror shipwreck on the island’s cliffs in December 2010. Fifteen were children aged 10 years or younger.