Australia shares change gears to inch higher after RBA hikes rates as expected

Australian shares reversed course to tick higher on Tuesday after the central bank raised interest rates as expected and flagged that rate hikes since the start of the year have tightened financial conditions.

The S&P/ASX 200 index was up 0.2% at 8,872.30 by 0345 GMT.

The benchmark had fallen 0.1% before the rate decision.

The Reserve Bank of Australia raised its key cash rate to a near 18-year high of 4.85% after its November policy meeting, and said it would continue to do what it considers necessary to bring inflation to target.

However, it removed a reference to increasing the cash rate further if needed.

The RBA’s 125 basis points of tightening this year have more than reversed the 75 basis points of policy easing from 2025, putting Australia at the hawkish end of major global central banks.

Elsewhere, the US Federal Reserve held rates steady this month, while the Reserve Bank of New Zealand stunned markets by pausing in a razor-thin vote.

Financials rose 0.4%, with top lender Commonwealth Bank of Australia advancing 1.5%.

Rate-sensitive real estate and consumer discretionary stocks gained 1% and 0.5%, respectively.

Miners were on track to snap a three-session losing streak on higher copper prices.

BHP and Rio Tinto rose around 0.2%, each.

Airline shares, which have been struggling with elevated fuel costs since the start of the Middle East conflict, were boosted by a 7% fall in oil prices overnight.

Qantas Airways was the biggest gainer among individual stocks, surging 6.3%, while rival Virgin Australia jumped 7.7%.

That supported a 0.7% rise in the industrials sub-index.

Falling crude prices, however, sparked a 3.2% decline in energy stocks.

Woodside Energy and Santos lost 3.4% and 2%, respectively.

Meanwhile, New Zealand’s benchmark S&P/NZX 50 index was steady at 13,700.02.