The sharemarket closed lower as the political impasse in the US continued to spook investors.
The benchmark S&P/ASX 200 Index dropped 11.7 points, or 0.23 per cent, to 5149.4, while the broader All Ordinaries lost 12.5 points to 5148.1.
Lonsec senior client adviser Michael Heffernan said shares had not fared too badly despite the uncertainty created by the lack of progress among politicians in the US.
"It looks like excessive nervous tension [about the US] has been allayed somewhat," he said.
Mr Heffernan said investors felt US politicians would resolve their differences over policy eventually, and avert a possible US government debt default on October 17.
Some encouraging local economic data also soothed investors a little.
Job advertisements rose for the first time in six months, a sign that the labour market is stabilising. Business confidence also hit a 3-year high.
The big banks closed mixed on Tuesday, with Westpac shedding 25¢ to $31.98, National Australia Bank losing 21¢ to $34.19, ANZ dropping 2¢ to $30.44, and Commonwealth Bank gaining 35¢ to $71.10.
In resources, BHP Billiton was 2¢ richer at $34.70, Rio Tinto lifted 25¢ to $60.25 and Fortescue Metals lost 9¢ to $4.69.
Sims Metal Management firmed 3¢ to $9.68 after it named former Harsco Corporation executive Galdino Claro as new CEO.
Takeover target Warrnambool Cheese jumped 72¢ to $7.18 as Canadian dairy company Saputo joined the takeover battle for the dairy producer, with a $390 million takeover bid.
The price of gold in Sydney was $US1324.80 an ounce, up $US10.52.
The dollar held on to its recent gains, supported by good local economic data and US dollar weakness brought on by the budget stalemate.
Late on Tuesday, the dollar was trading at US94.33¢, up from US94.26¢ on Monday.
CMC Markets sales trader Betty Lam said the dollar's strength largely reflected US dollar weakness and the NAB business confidence numbers. "Continued support for the Australian dollar at this level will be dependent on how much longer the US standoff will last," she said.
Data out this week includes the Westpac consumer sentiment survey on Wednesday and September employment figures on Thursday. The unemployment rate is expected to stay at 5.8 per cent for the second month. The number of people with jobs is expected to rise by 15,000 after two months of losses.