The Reserve Bank of Australia kept its interest rate steady Tuesday at 4.5%, its first pause in since starting to introduce hikes in February. In the last RBA meeting in May, board members suggested that the current level was sufficient.

Since October 2009, the central bank hiked policy rates six times.

In a statement, RBA Gov. Glenn Stevens the government has predicted that domestic inflation would likely spike in the upper half of the target zone over the next year.

He also noted concerns about sovereign creditworthiness in several European countries, and said, " the effects of these various factors on the world economy will need to remain under review."

As news announced the RBA is keeping interest rates on hold, the benchmark S&P/ASX200 index fell 29.9 points, or 0.7 percent, to 4399.8 points, while the broader All Ordinaries index had shed 26.8 points, or 0.6 percent, to 4426.8 points.

The mining sector remained flat during Tuesday's trade as BHP Billiton lost 23 cents at $38.01 while fellow mining heavyweight Rio Tinto had eased 92 cents to $66.22.

Commonwealth Bank was down 64 cents, or 1.25 per cent, at $50.73, Westpac had shed 56 cents, or 2.44 per cent, to $22.39, National Australia Bank had fallen 42 cents, or 1.71 per cent, to $24.21 and ANZ was 17 cents lower at $22.14.