Australian shares fell on Tuesday's close, tracking Wall Street markets, as investors grew wary of the potential impact of tariffs and government spending cuts on US economic growth.

The S&P/ASX 200 fell 0.9% or 72.2 points to close at 7,890.1.

Concerns about US economic growth, driven by tariff disputes, spending cuts, and geopolitical shifts, turned investors risk-averse and sparked a global sell-off, Bloomberg reported.

"The sell-off felt like a liquidation of any overweight/crowded positions, combined with a buyers' strike," said Susquehanna International Group's co-head of derivatives strategy Chris Murphy.

"Regarding the buying strike, why buy now when Trump is not concerned with the stock market and Powell said he's not in a rush," Murphy added.

On the domestic front, The Westpac-Melbourne Institute Consumer Sentiment Index rose to a three-year high of 95.9 in March from 92.2 in February as the Reserve Bank of Australia's rate cut helped ease financial pressures, according to a report.

Australian business conditions slightly improved in February, but confidence slipped back into negative territory, suggesting that firms maintained a cautious outlook despite last month's rate cut, according to a monthly survey by National Australia Bank.

The total value of Australia's residential dwellings rose 0.2% to AU$11 trillion in the December 2024 quarter, data from the Australian Bureau of Statistics showed.

In company news, PolyNovo (ASX:PNV) Chief Executive Swami Raote will step down from his role immediately after failing to reach an agreement with the board in relation to previously reported governance issues. Shares of the company fell 8% at market close.

Star Entertainment Group (ASX:SGR) is in talks with alternative investment manager Salter Brothers for a AU$750 million refinancing deal, the Australian Financial Review reported.

Rio Tinto Group (ASX:RIO) shareholder Palliser Capital said in a statement that it is urging the mining firm to reconsider unifying its dual-listed structure.