A shock inflation report in the final days of June has set investors up for a rocky start to the new financial year, after a two-day sell-off helped pull the Australian sharemarket back from its best return since 2021.

The local bourse dropped as much as 1 per cent on Thursday, adding to a 0.7 per cent loss a day earlier, after an unexpected spike in inflation to a six-month high of 4 per cent in May overshot consensus and raised the prospect of another rate rise in Australia.