Australian shares end flat as central bank governor flags ‘bumpy’ road to recovery

Australian shares ended little changed on Wednesday as optimism over a quarterly economic recovery was tempered by cautious comments from the central bank, while escalating trade tensions with China also dented investor sentiment.

The country's economy expanded by a bigger than expected 3.3% in the September quarter, following a coronavirus-induced contraction in June, though the central bank governor signalled monetary policy will stay accommodative for a while.

There is still a high degree of uncertainty about the outlook, said Reserve Bank Governor Philip Lowe, adding that the economic recovery is underway, but will be "uneven and bumpy".

Mining sub-index and gold stocks helped the S&P/ASX 200 index close 0.03% higher at 6,590.2 points, reversing course after trading in the red throughout the afternoon.

BHP Group and Rio Tinto climbed as much as 2.2% and 1.9%, respectively, as Dalian iron ore hit a record high.

"While the bounce is impressive, it still leaves the economy 4.2% smaller than it was prior to the pandemic and 3.9% smaller than a year ago... it will be some time before we can be confident that the economy is out of the woods," Felicity Emmett, senior economist at ANZ, wrote in a note.

However, the deteriorating trade relationship with China was a "very serious" matter, Australian Treasurer Josh Frydenberg said.

China has imposed dumping tariffs of up to 200% on Australian wine imports, and curtailed exports of lobsters, beef, timber, and coal from Down Under.

"We're seeing some of the initial phases of the start of a protracted trade war with China with Australia, which is very concerning," said Brad Smoling, managing director at Smoling Stockbroking.

New Zealand's benchmark S&P/NZX 50 index ended flat at 12,728.69 points as gains in utilities and industrial stocks were offset by losses in the healthcare and consumer sectors.