Australian shares closed on Monday at the lowest level in eight months, with technology stocks and commodities leading the losses, as investors cautiously await potential hawkish signals by the US Federal Reserve at the policy meeting this week.

The S&P/ASX 200 index ended 0.5% lower at 7,139.5 - its lowest close since May 27.

Miners skidded 1.4%, with South32 falling 4% after the diversified miner warned that COVID-19 curbs may further hit labour shortages at its flagship Illawarra mine.

Last week, Rio Tinto and BHP Group also flagged labour shortages. Rio and BHP slipped 0.7% and 0.2%, respectively.

Investors are cautiously awaiting the Jan. 25-26 Fed meeting at which it is expected to confirm it may soon start draining the massive amount of liquidity that has supercharged growth stocks in recent years. Markets overwhelmingly expect a 0.25% rate hike in March and three more by the year-end.

Australia's technology stocks fell to an eight-month low, losing 1.6%, after Wall Street's tech rout on Friday saw the S&P 500 and Nasdaq log their biggest weekly percentage drops since the onset of the pandemic.

"The Australian market is more or less following the US and anticipating that the Fed will have some genuine policy shift," said Brad Smoling, managing director at Smoling Stockbroking.

Domestic consumer price figures due on Tuesday and a more hawkish Fed could also set the stage for the Reserve Bank of Australia next week where it may end its bond buying in February and reinforce market wagers for a hike as soon as May or June.

Home furnishing retailer Adairs slumped 21.5% on weak earnings outlook.

On the other end, Uniti Group surged 9.3% after the fibre infrastructure provider said "more than one party" have shown interest in buying the company.

New Zealand's benchmark S&P/NZX 50 index closed 1.3% lower at 12,191.06.

Dairy exporter Fonterra sank 4.8%, while Fletcher Building slid 3.5%.