* Discretionary stocks fall as consumer sentiment survey slumps
* Resources drop as iron ore price continues tumble (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Naomi Tajitsu
SYDNEY/WELLINGTON, May 21 Australian shares slipped on Wednesday, hurt by miners as iron ore prices extended a worrying slide and added to a confluence of negative factors, including a drop in consumer sentiment and a ditched investment plan by Woodside Petroleum Ltd.
A measure of Australian consumer sentiment slumped in May to its lowest in over two years as households fretted about their own finances a week after the government unveiled a string of spending cuts and new levies in a tough fiscal budget.
Consumer discretionary stocks fell on the news with retailers Harvey Norman Holdings Ltd and David Jones Ltd dropping 1.6 percent and 0.3 percent respectively. Ten Network Holdings Ltd lost 1.1 percent.
"High petrol and utility prices, moderate wage growth and looming welfare cuts are likely to limit the discretionary wallet," said Ric Spooner, chief market analyst at CMC Markets in a note to clients. "Companies reliant on discretionary spending will be hoping for a lift in consumer confidence over coming months that might flow through into less saving and more spending."
The S&P/ASX 200 index lost 30.2 points to 5,390.2 by 0217 GMT, hitting near six-week lows. The benchmark ended 0.2 percent higher on Tuesday. U.S. stocks fell in a broad selloff overnight, with major indexes hitting session lows in afternoon trading.
The resource sector remained in the doldrums as Chinese iron ore futures fell for a third straight day to a fresh low and spot prices fell further below $100 a tonne on weak buying from steel mills in top consumer China.
Top tier miners BHP Billiton Ltd and Rio Tinto Ltd were down 1.7 percent and 2.1 percent, respectively. Oz Minerals Ltd stumbled 2 percent.
Banking stocks were also on the back foot with top lender Commonwealth Bank of Australia losing 0.6 percent.
Woodside Petroleum Ltd dropped 1.3 percent to one-month lows of A$40.38 after Australia's top gas producer ditched plans to take a stake worth up to $2.7 billion in Israel's flagship Leviathan gas project after failing to resolve a tax dispute.
Qantas Airways Ltd was down 1.5 percent after the embattled airline carrier said passenger numbers for April decreased by 1.5 percent from the previous year.
Adelaide Brighton Ltd tripped 3.5 percent to 3-1/2 month lows of A$3.63 after saying its first half net profit after tax is expected to be similar to 2013, excluding charges.
Austin Engineering Ltd slumped 20.7 percent to 5-year lows of A$1.21 after reducing its EBITDA guidance range to between A$15 million and A$18 million.
In New Zealand, the NZ50 share index slipped 0.7 percent to 4-week lows of 5,099.3 led by losses in children's clothing maker Pumpkin Patch and technology companies including Diligent and Xero, the latter of which will announce its annual results on Thursday.
Further losses in the index were limited by a rebound in online auction site Trade Me, which rose 1.1 percent to NZ$3.55, clawing back from a two-year low of NZ$3.53 hit the previous day.
(Editing by Shri Navaratnam)