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By Sameer Manekar and Sherin Sunny

July 22 (Reuters) -Australian shares started the week on a dismal note as rate-hike worries and uncertainty surrounding the U.S. elections kept investors away, with the sell-off further compounded by miner South32's 13% plunge on doubts over its alumina refinery.

Investors remained on the sidelines for a third successive day after mixed local jobs data last week and a still above-target inflation cast doubt on the potency of the current policy's restrictiveness, nudging up the chances of an August rate hike by the Reserve Bank of Australia to 22%. 0#RBAWATCH

Traders also weighed U.S. President Joe Biden's decision to withdraw his re-election campaign, and the consequences of a potential Donald Trump presidency on markets.

The S&P/ASX 200 index .AXJO ended 0.5% lower at 7,931.7 points on Monday. The index is now around 152 points below its all-time high scaled last week.

"The market has had a rocky start to the week, with political uncertainty in the United States and interest rate concerns putting investors into a 'selling mood' today," Tim Waterer, market analyst at KCM Trade, said.

"A potential rate hike (by RBA) is hanging like a cloud over the Australian market with investors nervous about whether the economy can weather even tighter monetary conditions than we presently have."

South32 S32.AX was the top loser, plunging more than 12% to mark its worst fall since March 2020, after a statutory body recommended conditions to its Worsley Alumina refinery that the miner says create "significant operating challenges" and impact viability.

Shares of South32 weighed in the mining index .AXMM, which lost about 1%, with BHP Group BHP.AX and Fortescue FMG.AX down about 0.4% each.

Banks .AXFJ shed 0.4% in their third successive session in red. Three of the "Big Four" banks gave away between 0.5% and 1%.

Other sectors including healthcare .AXHJ, technology .AXIJ, and energy .AXEJ were down between 0.3% and 1.7%, with Woodside Energy WDS.AX losing 2.3% after the refiner said it would buy U.S. LNG developer Tellurian TELL.A for $1.2 billion.

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index .NZ50 edged lower to 12,309.91 points, but continued to hover around its highest level since February 2022.

Reporting by Sameer Manekar in Bengaluru; Editing by Sherry Jacob-Phillips

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