[SYDNEY] Australian shares fell more than 1 per cent on Friday, their most so far in December, as a new coronavirus cluster in Sydney revived movement curbs and dimmed hopes of a speedy economic recovery.

The S&P/ASX 200 index declined 1.2 per cent to finish the day at 6,675.50. However, for the week, it added 0.5 per cent in its seventh straight weekly gain.

Sydney, Australia's largest city, has detected a new virus cluster, putting the states back on alert and raising concerns about the faster-than-expected recovery projections made just a day earlier.

"The spike in Covid-19 cases in Sydney's northern beaches reminds us that there are still downside risks to the outlook," ANZ Research said in a note.

Australian states and territories have begun imposing border restrictions, marring Christmas travel plans, risking a travel bubble with New Zealand, and sending travel stocks crashing.

"(The) big concern from investment point of view is that some local leaders are reacting to populist approaches rather than doing what is best for the Australian economy," said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Among losers, heavyweight financials were the biggest drags on the index, with all the "Big Four" banks shedding between 1 per cent and 2 per cent.

New Zealand's benchmark S&P/NZX 50 index lost 1.6 per cent to settle at 12,682.0.

REUTERS