The Australian stock market staged a late-session recovery on Tuesday to finish 0.4 per cent lower as the Reserve Bank of Australia's unexpected move to hold official rates steady helped move out of their hole.

The benchmark S&P/ASX200 index was down 18.4 points, or 0.4 per cent, to 4606.9, while the broader All Ordinaries index shed 17.8 points, or 0.4 per cent, to 4660.6.

Among the sectors, materials and energy fell 0.9 per cent, while financials slid 0.4 per cent.

The Reserve Bank held its key cash rate steady at 4.5 percent in a surprise to many who had expected a hike, though it did say that higher rates would be needed at some point.

After treading water for about 45 minutes after the central bank's announcement, banks and retailers moved off their session lows and some retailers ended in positive territory.

"The RBA is fairly keen not to overplay their hand given there is an argument they probably raised rates too quickly at the end of last year and early this year," said Burrell & Co dealer Daniel Manley.

"They are probably hesitant not to push things too far. Even though our economy is doing pretty well, it is heavily skewed all to one sector (mining)," he said.

The major banks rose from intraday lows after the RBA's decision. ANZ shed 11 cents at $23.57, CBA took off 29 cents to $51.25, NAB declined eight cents to $25.37 and Westpac slumped 21 cents to $23.11.

Retailers too recovered as interest rates held steady, though concerns that another hike is still looming limited gains.

Harvey Norman finished flat at A$3.80 while the nation's largest department store Myer rose 1.3 percent to A$3.85. Rival David Jones trading without the rights to its dividend, lost 3.9 percent to A$4.87.

The benchmark S&P/ASX 200 index ended down 18.4 points to 4,606.9, after trading as low as 4,559.2. The index rose 1 percent on Monday in holiday-reduced volume.

New Zealand's benchmark NZX 50 index lost 0.3 percent to 3,218.3.

Companies with a big portion of U.S.-based earnings continued to feel the pressure from the high Aussie dollar, though the dollar's slide after the RBA decision helped to cut losses.

James Hardie fell 1.2 percent to A$5.56 and Brambles ended down 1.1 percent at A$6.22, with investors worried that the currency around 96 U.S. cents will dampen U.S. earnings translated back into local currency.

In the resource sector, market heavy weight BHP Billiton fell 1.3 percent to A$39.50 after copper prices eased with a rising greenback. Alcyone Resources, the most traded stock by volume finished up four-tenths of a cent or 9.52 per cent at 4.6 cents after the company announced drilling results from its Mt Gunyan silver deposit.

With Reuters