The passengers included people of Iraqi, Iranian and Kurdish origin, Prime Minister Julia Gillard said.
The deaths at remote Christmas Island underscored dangers faced by hundreds of refugees who have tried to sail from Indonesia to Australia in recent years — often in cramped, barely seaworthy boats — to start new lives after escaping from poor, war-ravaged countries.
Navy and customs officers on the island pulled 42 people from raging surf in the hours after the boat was battered to pieces on limestone rocks, Gillard said. Eleven children were among those rescued. Immigration Minister Chris Bowen said up to 100 people may have been aboard, though the true number may never be known.
Gillard said search efforts would continue.
"We do not know with any certainty how many people there were on the boat so we've got to prepare ourselves for the possibility that more bodies will be found and that there has been further loss of life than we know now," she told reporters Thursday.
Sea conditions were dangerous, with a cyclone hovering northwest of the island, which is the 52-square-mile (135-square-kilometer) tip of a dormant volcano poking out of the Indian Ocean 1,600 miles (2,600 kilometers) from the Australian mainland.
"This is very fluid situation and it's being conducted in what are quite difficult circumstances," Australian Federal Police Deputy Commissioner Andrew Colvin said. "Weather conditions on the island are poor, which is making it very difficult for all organizations involved in search and rescue and recovery efforts."
A local hospital treated more than two dozen injured, and authorities transported two women with the worst injuries to Perth in mainland Australia for treatment. A victim identification team was arriving Thursday.
The Royal Flying Doctor Service sent doctors to the island to treat the injured, said spokeswoman Joeley Pettit-Scott. Blunt trauma was common among the victims, many of whom were battered by debris as they clung desperately to the remains of the sinking boat.
Christmas Island residents watched helplessly from a high cliff Wednesday morning as the boat struggled in the monstrous waves and then crashed, dumping screaming men, women and children into the stormy surf.
"It was just horrible. People getting crushed. Bodies, dead children, the whole thing was pretty awful," island resident Simon Prince told The Associated Press.
Women and children were among the dead, said Colin Barnett, premier of Western Australia, the state closest to Christmas Island.
Christmas Island is closer to Indonesia than the Australian mainland and a frequent target of refugee hopefuls, who are housed in a detention center there.
In recent years, many asylum seekers have come from Afghanistan, Iran, Iraq and Myanmar. Generally, they first fly to Indonesia and then continue on to Australia by sea, often in small, rickety fishing boats with few provisions and no safety gear.
Australian authorities acting on intelligence usually track larger asylum seeker boats after they leave Indonesia and often intercept them when they reach Australian waters. But some are too small to appear on radar and may not be spotted until they are very close to land.
The stricken boat appeared near the shore very early Wednesday morning in bad weather that hampered visibility.
Refugee advocates suggested Australian authorities should have known about the boat and done more to intercept it before it neared the island's rocky coast.
"If indeed they did know the boat was coming, which is highly likely, why didn't someone stop it?" Pamela Curr from Asylum Seeker Resource Center told Australian Broadcasting Corp. television. She urged a full inquiry be conducted.
But the prime minister praised the actions of the navy and customs officials who responded to the crisis, saying they risked their lives to save those in distress.
"In very rough and dangerous seas, there is a limit to what can be achieved in terms of radar and other surveillance mechanisms," Gillard said.
Photos and video from witnesses showed the boat crashing into jagged rocks and breaking apart, and people floating in the water amid the wreckage. The boat was about 20 to 30 feet (6 to 9 meters) long, with a cabin covered by a sheet of fabric or plastic.
Dozens of locals collected life jackets and threw them from the top of the cliffs to those in the water, then watched helplessly as they were blown back in the wind and waves.
"When the boat hit the cliff, there was a sickening crack," said Prince, who lives next to the cliff where the boat crashed. "I don't think anybody could swim."
It is not the first time asylum seekers have died trying to make the journey followed by the stricken boat.
In October 2001, 374 people died — most of them believed to be from Afghanistan and Iraq — when an asylum seekers' boat sank en route from Indonesia to Christmas Island. Two years earlier, a boat believed to be carrying about 100 asylum seekers from Indonesia to Australia disappeared and may have sunk.
"This incident is a tragic reminder of the danger faced by people fleeing persecution and human rights violations in their home countries, and the desperate measures they will resort to in search of safety," said Richard Towle, the United Nations refugee agency's regional representative.
According to the UNHCR, an estimated 848 people died or disappeared in 2009 in Italy, Yemen, Spain, and Greece — the main areas worldwide of large-scale migration.