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

Australian shares rebounded on Tuesday following the Reserve Bank of Australia's (RBA) decision to increase interest rates as anticipated. The S&P/ASX 200 index gained 0.2%, reaching 8,872.30 by 03:45 GMT, having previously fallen 0.1% before the rate announcement. The RBA raised its key cash rate to a near 18-year high of 4.85% following its November policy meeting, affirming its commitment to bringing inflation to target.

However, the central bank eliminated the possibility of further rate hikes if necessary. This year's 125 basis points of tightening significantly offset the 75 basis points of easing from 2025, positioning Australia among the hawkish central banks globally. Financial institutions saw a 0.4% increase, with Commonwealth Bank of Australia leading the gains at 1.5%.

Rate-sensitive sectors such as real estate and consumer discretionary stocks rose by 1% and 0.5%, respectively. Copper prices' upward trend boosted miners, with BHP and Rio Tinto each climbing by around 0.2%. Airline shares benefited from a 7% drop in oil prices overnight, with Qantas Airways and Virgin Australia experiencing substantial gains of 6.3% and 7.7%, respectively, contributing to a 0.7% rise in the industrials sub-index.

Conversely, energy stocks faced a 3.2% decline due to falling crude prices, with Woodside Energy and Santos losing 3.4% and 2%, respectively. Meanwhile, New Zealand's benchmark S&P/NZX 50 index remained unchanged at 13,700.02.