A Reserve Bank warning to borrowers that low interest rates will not last has contributed to extended losses on the share market.
The ASX posted its biggest fall of the month on Tuesday, 0.67 per cent, as all share categories except for technology fell.
The ASX was already half a per cent lower before Reserve Bank boss Philip Lowe told economists of the dangers for people taking advantage of low rates.
"We are trying to get interest rates up over time," he said.
"People borrowing today need to remember that."
Mr Lowe ruled out a rate rise next year and said the RBA was making good progress towards its goal of inflation of between two and three per cent.
The chief investment officer of asset manager 4D Infrastructure Sarah Shaw was not worried by the current higher inflation levels.
Like the RBA, Ms Shaw claimed higher prices were a temporary by-product of the pandemic.
"Supply chain disruption is causing inflation pressures," Ms Shaw said.
"We believe they will ease and we'll start seeing normalised levels of inflation.
"We don't expect 1970s and 1980s-style inflation."
The topic will remain on investors' minds on Wednesday after US retail sales data is published.
The figures are likely to reveal signs of any impact inflation had on consumer spending.
On the ASX, materials shares were the biggest weights.
Heavyweight miners BHP and Rio Tinto each lost more than two per cent. Fortescue shed 0.31 per cent.
The benchmark S&P/ASX200 index closed down 49.7 points, or 0.67 per cent, to 7420.4 points.
The All Ordinaries closed lower by 51.1 points, or 0.66 per cent, to 7747.1 points.
The Aussie dollar also slipped after Mr Lowe's speech but remained within the 73 US cents band.
In company news, Telstra is trying to build its health and energy businesses to deliver profitable growth across its international network.
The plans are part of the company's T25 growth strategy unveiled in September.
The investor day presentation led shares lower by 1.25 per cent to $3.95.
In banking, the big four all had losses of less than 0.6 per cent.
Best & Less Group is not expected to meet first-half sales and earnings forecasts due to the impact of coronavirus lockdowns.
The family clothing retailer joined the ASX this year.
Shares were down 2.28 per cent to $3.42.
Property group Mirvac said momentum in residential sales shows no signs of slowing.
Market conditions were expected to remain favourable, helped by low interest rates.
Commercial leasing, however, was less buoyant and the company conceded working from home would remain part of the economy.
Shares were unchanged at $2.80.
Lender Resimac reported loan settlements from July to October were up 72 per cent on the same period last year.
First-half normalised net profit is expected to be about the same or more than the prior corresponding period.
Shares were down 1.9 per cent to $1.76.
Cancer treatment provider Imugene rose after a deal with two companies to evaluate one of the former's products.
Pfizer and Merck KGaA, Darmstadt, Germany, will treat patients with gastric cancer using Imugene's HER-Vaxx.
The phase two clinical trial will assess the efficacy of HER-Vaxx with and without other treatments.
Shares were up 3.48 per cent to 59 cents.
On Wednesday, there will be annual general meetings for companies including A2 Milk, Afterpay, Seek and Seven.
The Australian dollar was buying 73.41 US cents at 1706 AEDT, lower from 73.43 US cents at Monday's close.
ON THE ASX
* The benchmark S&P/ASX200 index closed down 49.7 points, or 0.67 per cent, to 7420.4 points on Tuesday.
* The All Ordinaries closed lower by 51.1 points, or 0.66 per cent, to 7747.1 points.
* At 1706 AEDT, the SPI200 futures index was unchanged at 7409 points.
One Australian dollar buys:
* 73.41 US cents, from 73.43 cents on Monday
* 83.81 Japanese yen, from 83.62 yen
* 64.52 Euro cents, from 64.11 cents
* 54.70 British pence, from 54.69 pence
* 104.32 NZ cents, from 104.12 cents.