Australian shares have fallen in afternoon trade, with the key focus being the Reserve Bank's policy decision today.

The ASX 200 index was down 0.2 per cent to 7,303 points by 2:25pm AEST.

Energy stocks like Whitehaven Coal (+3.7pc), Oil Search (+4.5pc), Woodside Petroleum (+2.1pc) and Beach Energy (+2.6pc) were the best performers, after a big jump in oil prices overnight.

Meanwhile, gold miner Ramelius Resources (-4.9pc), retailer Harvey Norman (-3.1pc) and healthcare stocks Polynovo (-5.7pc) and Cochlear (-2.6pc) suffered heavy falls.

The Australian dollar had lifted to 75.63 US cents (up 0.5 per cent).

Today's RBA meeting will be unusual in that there will be a monthly statement (at 2:30pm), followed by a press conference by its governor Philip Lowe (at 4:00pm).

The RBA has foreshadowed, for months, that its meeting today will be an important one —  implying it might announce further bond buying (or "money printing", colloquially speaking).

What might the RBA announce?

Since the pandemic stuck in early 2020, the RBA has been purchasing “three-year” government bonds to push interest rates really low.

To be more specific, it’s been hoovering up piles of three-year bonds to deliberately push down interest rates on bonds with a lifespan of three years, which has had a knock-on effect on the interest rates on bonds with longer lifespans than three years.

It’s been part of the bank’s stimulus measures.

It’s been wanting to make it as cheap as possible for businesses to borrow money to invest and spur economic activity for the next few years, so it has wanted bond rates to be exceptionally low for the next few years to accommodate that.

Economists say the “maturity” of those three-year bonds (which refers to the bond’s lifespan) is unlikely to be extended.

The three-year bonds were originally designed to mature in April 2024, but there have been some murmurs that the RBA might push their maturity date out to November 2024.

More broadly, as part of the central bank’s broader stimulus efforts, it has reiterated, many times, that it does not plan to lift the cash rate target above its record low level (currently just 0.1 per cent) for the next three years.

Also, last year the RBA pledged to pump $200 billion worth of cash into the economy, by implementing two rounds of quantitative easing (QE), which involves buying longer-term government bonds.

Economists have been referring to the second round of that program (worth $100 billion) as "QE2", which is due to expire in September, but interestingly, some expect the RBA might use today’s meeting to announce plans to "create" even more cash in coming months (QE3), but at a slower rate.

So today’s RBA board meeting will have plenty of interest.

"On the fate of QE, once the current $100 billion programme ends in September, opinions are split," said NAB head of foreign exchange strategy Ray Attrill wrote in a note.

He said the possible options range from "a halving of QE3 versus QE2 to $50 billion over six months (the most hawkish/least dovish outcome) to full roll-over of the $100 billion for six month (the most dovish)."

"NAB sits in between looking for a quantum in the order of $75 billion over six months.

"The median and modal view in the Reuters survey is for the RBA to adopt a more flexible programme to be reviewed relatively frequently, but with everyone who is forecasting this expecting the RBA to begin with initially unchanged weekly purchases of $5 billion." 

Westpac sells NZ life insurance arm for $374m

Westpac will sell its New Zealand life insurance business to Fidelity Life for NZ$400 million ($374  million), both companies said on Tuesday.

The unit is the latest asset to be offloaded by Australia's second-largest bank over the past year as it narrows its focus to its core banking operations after a series of scandals ramped up regulatory scrutiny.

"This transaction is the latest step in simplifying our business," Westpac chief executive Peter King said in a statement.

Westpac expects the sale to add 7 basis points to its common equity tier 1 capital and result in a post-tax gain after it is completed by the end of 2020.

Westpac Life New Zealand had annual in-force premiums of NZ$149 million as of the end of March, it said.

Fidelity, New Zealand's largest locally-owned life insurer, said most of the deal will be funded by its largest shareholder NZ Super Fund and the investment arm of Te Rūnanga o Ngāi Tahu, which picked up a 24.9% stake for NZ$140 million on Tuesday.

As part of the deal, Fidelity will offer life insurance products to Westpac customers under a 15-year distribution deal, the companies said.

Westpac shares have risen to $26.60 (up 0.3 per cent).

Oil jumps on failed OPEC+ talks

Wall Street was closed for an extended July 4 long weekend.

European markets closed higher overnight, including Britain's FTSE (+0.6pc), France's CAC (+0.2pc) and Germany's DAX (+0.1pc).

Spot gold lifted to $US,1791.61 (up 0.3 per cent).

On oil markets, Brent crude futures jumped to a three-year high of $US77.10 per barrel (up 1.2 per cent).

This was after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) called off talks on output levels, meaning no deal to boost production has been agreed.

OPEC+ ministers abandoned the talks and set no new date to resume them, after clashing last week when the United Arab Emirates rebuffed a proposed eight-month extension to output curbs.

They previously agreed on record output cuts in 2020 to cope with a COVID-induced price crash.

The oil-rich nations have been gradually easing the output restrictions, but on Friday the UAE blocked a plan to lift output by about 2 million barrels per day (bpd) from August to December 2021 and to extend the pact on a series of gradual output shifts to the end of 2022.

ING Economics said OPEC+'s failure to come to a deal may provide some brief upside to oil prices but said "it could also signal the beginning of the end for the broader deal, and so the risk that members start to increase output."

ABC/Reuters