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By Adwitiya Srivastava

Feb 17 (Reuters) - Australian shares fell on Monday, dragged down by a sharp decline in financials, while investors avoided risky bets ahead of the local central bank's policy decision on Tuesday.

The S&P/ASX 200 index .AXJO shed 0.2% to close at 8,537.1. The benchmark had gained 0.2% on Friday.

The Reserve Bank of Australia $(RBA)$ will announce its interest rate decision on Tuesday. Forty out of 43 economists polled by Reuters forecast a quarter-point rate reduction, which if done, will be the RBA's first cut in over four years.

Heavyweight financials .AXFJ slipped as much as 2.4%, its worst intraday fall since January 13, helmed by a 4.1% decline in Westpac WBC.AX, after the country's oldest bank reported margin contraction in the first quarter.

Within the sector, insurance companies collectively tanked after Peter Dutton threatened to break them up, accusing them of exploiting customers. Australia will vote in the federal election later this year.

Suncorp Group SUNDD.AX plunged as much as 21.3% to its lowest since May 30, 2024, while Insurance Australia Group IAG.AX slid about 4% to a three-month low.

"Dutton's comments didn't help insurers on the ASX as they demonstrated that policies and practices within the insurance industry may face closer political scrutiny down the road," said Tim Waterer, chief market analyst at KCM Trade.

"The comments probably contributed to investors shying away from insurance stocks today."

Gold stocks .AXGD dropped 2.7%, while miners .AXMM shed 0.2% as iron ore prices slipped after concerns over cyclone-related supply disruptions eased. IRONORE/

Among individual stocks, Star Entertainment SGR.AX jumped as much as 16.7% after the cash-strapped firm announced that U.S.-based Oaktree Capital Management OAKCP.UL has offered to refinance A$650 million ($413.40 million) of its debt.

New Zealand's benchmark S&P/NZX 50 index .NZ50 climbed 0.6% to finish the session at 13,068.93 points.

(Reporting by Adwitiya Srivastava in Bengaluru; Editing by Sumana Nandy)

((Adwitiya.Srivastava@thomsonreuters.com))

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