* Technology stocks mark worst day in over 1 month

* Afterpay tumbles 5%, hits over two-month low

* Australia's cenbank holds rates at record low

Oct 5 (Reuters) - Australian shares closed lower on Tuesday, with technology stocks leading the decline after a sharp sell-off on Wall Street, while the Reserve Bank of Australia left its monetary policy unchanged as widely expected.

The S&P/ASX 200 index settled down 0.4% at 7,284.4, recovering some ground after a more than 1% drop in early trade as markets across Asia cut losses.

Major indexes on Wall Street fell overnight, as investors dumped Big Tech and other growth stocks in the face of rising Treasury yields, while concerns about a potential U.S. government debt default also fed caution.

Technology stocks in Australia fell 3% and recorded their worst session in more than a month. Buy-now-pay-later giant Afterpay shed 5% to close at its lowest level in over two months, while artificial intelligence firm Appen Ltd settled at a three-and-a-half-year low.

"It would seem that we have started the month with a lot of volatility... and big swings on Wall Street certainly don't help," said Brad Smoling, managing director at Smoling Stockbroking.

Meanwhile, the country's central bank held interest rates at a record low for an 11th straight month, and sounded ready to keep them there for a lot longer, even as pressure mounts for a hike to cool a red-hot housing market.

"We didn't expect the RBA to change policy, and that's probably helped stabilise the market to some degree," said Smoling.

Heavyweight financials fell 0.2% after notching the best session in nearly a month on Monday. Three of the so-called "Big Four" banks - National Australia Bank Ltd, Australia and New Zealand Banking Group and Westpac Banking Corp - slipped between 0.1% and 0.7%.

New Zealand's benchmark S&P/NZX 50 index ended more than 1% lower at 13,199.99, dragged down by healthcare and technology stocks.

A private think tank said business confidence in the country dropped in the third quarter as the latest COVID-19 lockdown hurt sentiment.

(Reporting by Harish Sridharan in Bengaluru; Editing by Subhranshu Sahu)