The sharemarket finished lower after a key indicator of local manufacturing fell to its weakest point in four years, fuelling fears of sluggish growth.
The benchmark S&P/ASX 200 slipped from five-year highs, dropping 25 points, or 0.5 per cent, to 5166.2, while the broader All Ordinaries lost 24.7 points, or 0.5 per cent, to 5143.9.
"A lot of it came down to release of the manufacturing data," said JBWere executive director Mike Kendall. "We're looking at a slower growth outcome, or a lower growth outcome, that really suggests that the economy is quite sluggish."
The Australian Performance of Manufacturing index fell 7.7 points to 36.7, its lowest since May 2009 and the lowest export reading since exports were included in 2004.
As a result, mining stocks continued to take a drubbing, with the sector down 1.4 per cent, consumer staples dipped 0.7 per cent and financials edged down just 0.2 per cent. Telecommunications was the only sector to finish higher, up 1 per cent. BHP lost 1.6 per cent to $32.17. Rio Tinto finished 1.4 per cent lower at $55.03.
While most of the major bank stocks eased after strong runs on Tuesday, Westpac continued to push record highs ahead of its earnings report, due out on Friday.
Westpac rose 0.8 per cent to $34.06, while CBA slipped 0.7 per cent to $72.95, ANZ shed 0.5 per cent to $31.89 and NAB was flat at $33.95.
Telstra was the main beneficiary of investors' search for yield. It pushed to its highest since March 2005, closing 1 per cent up at $5.03. Strong results from its venture into 4G and an aim to increase its fully franked dividend, which is already at 28¢ a share, also buoyed the telco's stock.
A drop in Qantas domestic passengers in March hurt the airline, down 1.8 per cent to $1.87.
The Australian dollar failed to gather any steam, with markets closed in China and many centres in Europe closed for Labour Day.
An impending interest rate decision from the US Federal Reserve also held the Aussie dollar back.
In late trading it was buying US103.65¢.