At the market close, the benchmark S&P/ASX 200 index was down 14.10 points or 0.23 percent at 6,006.40, while the broader All Ordinaries index was down 18.80 points or 0.31 percent at 6,128.00.
"The ASX 200 had rallied as much as 31 points or 0.5% after the first hour of trade but quickly shed those gains following news that Queensland will be closing its border to greater Sydney, declaring it a new hotspot, and sharp contraction in June quarter inflation," CommSec market analyst James Tao said.
Meanwhile, data from the Australian Bureau of Statistics showed consumer prices dropped 1.9 percent in the June quarter, which was the biggest fall in 89 years, he said.
In the financial space, the big banks surged with Commonwealth Bank up 1.11 percent, ANZ up 2.10 percent, National Australia Bank up 1.56 percent and Westpac Bank up 1.38 percent.
Mining stocks plummeted with BHP down 1.97 percent, Rio Tinto down 0.68 percent, Fortescue Metals down 0.24 percent and goldminer Newcrest down 0.80 percent.
The country's oil and gas producers slumped with Oil Search down 1.96 percent, Santos down 1.48 percent and Woodside Petroleum down 1.32 percent.
Australia's largest supermarkets lifted with Coles up 1.91 percent, and Woolworths up 0.13 percent.
Meanwhile telecommunications giant Telstra dipped 0.30 percent, the national carrier Qantas slumped 3.06 percent and biomedical firm CSL dived 0.68 percent.
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