By Sneha Kumar

July 10 (Reuters) -Australian shares fell on Wednesday, weighed down by a sell-off in heavyweightmining stocks due to a decline in ironore prices, while shares in New Zealand finished higher after the central bank kept its benchmark rate steady, as expected.

The S&P/ASX 200 benchmark index .AXJO closed 0.2% lower at 7,816.8 points.

New Zealand's main share index .NZ50 rose 0.8% to its highest in more than a month after the Reserve Bank of New Zealand kept interest rates at a 16-year high, as expected.

The stance of New Zealand's central bank is leaning towards being dovish, and any change in the cash rate will be dictated by movements in the consumer price index (over the next few months), said Tom McBride, financial advisor at Hamilton Hindin Greene.

"Most importantly, the (rate-setting) committee did not comment on interest rate hikes," McBride said, adding that this is a positive for markets.

Back in Sydney, miners .AXMM declined 1.2% to a one-week low due to bleak demand outlook in China and lower ironore prices. Top miners BHP BHP.AX, Rio Tinto RIO.AX and Fortescue FMG.AX lost between 1% and 1.3%.

Data from China showed that consumer price inflation came in below expectations while producer price deflation persisted, pointing to stubbornly weak demand.

"The undershoot in China's CPI introduces anothersource of worry, highlighting that the path for Chinese economic recovery remains bumpy and keeps the outlook murky for Aussie miners," said Hebe Chen, a market analyst at IG.

Among individual stocks,shares of Incitec Pivot IPL.AX ended flat but fell as much as 6.2% earlier in the session after the firm said it ended discussions for the sale of its fertiliser business.

Money manager Insignia Financial IFL.AX lost 7.2% and was the top loser on the benchmark after it dismissed media reports about a possible takeover.

Energy stocks .AXEJ shed 0.6% while banks .AXFJ recovered early losses, rising 0.2% to a record-high with ANZ ANZ.AX rallying 1.4% higher.

Reporting by Sneha Kumar in Bengaluru; Editing by Sonia Cheema

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