Australian shares lose ground as federal budget looms

The Australian share market has finished lower amid interest rate woes and anticipation of the federal budget.

The benchmark S&P/ASX200 index closed down 12.4 points, or 0.17 per cent, to 7,264 on Tuesday.

The broader All Ordinaries was down 15.4 points, or 0.21 per cent, to 7,456.

Downwards performance in the market is typical for this time of year, IG analyst Tony Sycamore said.

While there may be more dips in the coming weeks, Mr Sycamore believes there is "a strong layer of support" coming from the 200-day moving average, uptrend lines and year-to-date lows.

Fellow IG analyst Hebe Chen added that the market is taking a "calm position" ahead of this week's major announcements.

"It's not like a major theme day - it's small cases coming together and the market tends to respond more in the calm," she told AAP.

The financials sector finished in the green, up by 0.5 per cent, with major banks turning around from a mixed performance at noon.

Commonwealth Bank finished up 0.2 per cent to $97.34, following its quarterly results announcement.

Australia's largest bank reported a net profit increase of 1 per cent to $2.6 billion but conceded net interest income - how much more the bank made from than it paid on deposits - was 2 per cent lower in the third quarter.

CBA chief executive Matt Comyn said the outlook for the bank remains positive regardless.

"The strength of our balance sheet means we are well placed to continue supporting our customers and the broader Australian economy," he said in the announcement.

NAB was up by 1 per cent to $27.36 and ANZ rose 0.7 per cent to $24, while Westpac clawed back its losses to finish up 0.1 per cent at $21.77.

Shares in US regional banks closed higher in a quiet overnight session ahead of the US inflation report release slated for Wednesday night.

"From an Australian point of view, analysts are pretty certain there will be a pause from the RBA," Ms Chen said.

"But there are more questions about if the Federal Reserve will pause for the next month."

The real estate sector struggled the most throughout the trading session, closing down 1.5 per cent.

Goodman Group fell 0.7 per cent to $19.82, Scentre dropped 2.1 per cent to $2.82, and Mirvac was down 2.5 per cent to $2.33.

Lendlease was the outlier, up 1.2 per cent to $7.88, alongside HealthCo Healthcare and Wellness REIT which climbed 1.1 per cent to $1.35.

The heavyweight mining sector was also down by 0.4 per cent, energy fell 0.3 per cent, and health care eased by 0.6 per cent.

The materials sector is a surprise to analysts who say export data from China should have seen a positive response from the market.

Ms Chen said a better-than-expected result from China traditionally supports the Australian materials sector, which makes the results today "confusing".

Mr Sycamore said the market is continuing to digest last Friday's stronger-than-expected US payroll data while preparing for the federal budget, which will be announced on Tuesday night.

"While much of the budget's new policies and initiatives have already been leaked, the federal treasurer will have saved a surprise or two for budget night," Mr Sycamore said.

"While our base case is that the impact on markets will be minimal, a nasty surprise or two for markets cannot be ruled out."

The Australian dollar was buying 67.72 cents, from 67.88 US cents at Monday's ASX close.

ON THE ASX:

* The benchmark S&P/ASX200 index closed down 12.4 points, or 0.17 per cent, to 7,264 on Tuesday

* The broader All Ordinaries was down 15.4 points, or 0.21 per cent, to 7,456

CURRENCY SNAPSHOT:

One Australian dollar buys:

* 67.72 US cents, from 67.88 US cents at Friday's ASX close

* 91.27 Japanese yen, from 91.64 Japanese yen

* 61.58 Euro cents, from 61.50 Euro cents

* 53.66 British pence, from 53.69 British pence

* 106.88 NZ cents, from 107.22 NZ cents