Australia shares slip as banks weigh; miners fare better

(Adds analysis, quotes, stocks on the move)

SYDNEY/WELLINGTON, Sept 4 (Reuters) - Australian shares slipped on Friday and were on track to post one of their worst weekly performance this year in the wake of disappointing data that showed the economy hit a very soft patch last quarter.

Persistent worries about slower growth in China, Australia's biggest export market, further soured sentiment and also pushed the local dollar to fresh 6-1/2 year lows below 70 U.S (Other OTC: UBGXF - news) . cents .

The S&P/ASX 200 index, having erased earlier gains, was down 0.1 percent, or 6.4 points, at 5,021.4 by 0320 GMT. On the week, it was down 4.6 percent, a magnitude only surpassed by a 4.8 percent drop in June this year.

Weighing on the index were losses in the banking sector. All the big four lenders were in the red, led by a 2.2 percent fall in Westpac Banking Corp. Shares (Berlin: DI6.BE - news) in National Australia Bank reached A$29.19, its lowest in over two years.

Earlier this week, official data showed the economy grew at its weakest pace in two years last quarter.

But helping to offset the drag were gains for the miners following a bounce in commodity prices. Resources exporters would also benefit from a weaker currency.

The major miners BHP Billiton (NYSE: BBL - news) and Rio Tinto (LSE: RIO.L - news) were about 1 percent higher.

"After weeks of being beaten down, maybe the market is seeing value particularly at these price entry points, so potential bargain hunting in the space," Tristan K'Nell, head of trading at QuayEquities wrote in a report.

Topping the leader board was telecommunications company M2 Group, which gained as much as 10.9 percent, helped in part by a broker upgrade.

For more individual stocks activity, click on

Also struggling, New Zealand's benchmark NZX50 index slipped 0.3 percent, or 19.2 points, to 5,550.5, easing for a fifth straight day.

Ongoing losses in Fletcher Building (NZSE: FBU.NZ - news) , one of the country's largest companies, was a major contributor to the market's weakness.

Fletcher slumped more than 1 percent to NZ$6.93, its weakest since October 2012. The construction materials maker was hit hard this week on the sluggish economic data in Australia, one of its biggest export markets.

SkyCity Entertainment, which operates casinos in New Zealand and Australia, slid to a seven-month low of NZ$3.76 amid concerns that slower growth in China might lead to a dip in Chinese tourism to both countries. (By Ian Chua in SYDNEY and Naomi Tajitsu in WELLINGTON; Editing by Simon Cameron-Moore)