Market sentiment was aided by news that China's Citic Resources was taking a big stake in Alumina.
The benchmark S&P/ASX 200 closed up 0.7 per cent at 5036.9. This year it is up 8.3 per cent after rising 15 per cent in 2012. Trading value grew to $6.1 billion -- well above the December quarter average of $4.1bn.
Yesterday's peak of 5045.4 marked the index's highest since Lehman Brothers collapsed in September 2008.
The rise accelerated after Wesfarmers' first-half net profit rose 9.3 per cent to $1.29bn, with its Coles supermarkets division earnings jumping 15 per cent.
"The strong earnings report from Wesfarmers today is acting like a bellwether for the general economy," CMC Markets sales trader Ben Taylor said.
Wesfarmers shares rose 1.2 per cent, aided by a fully-franked interim dividend of 77c -- up 10 per cent on the previous half.
Analysts said Citic's foray into Alumina signalled China's appetite for resources as the worldwide economy recovered.
"To an extent the Alumina deal is helping resources but many of the unloved, mid-tier names in the resources space of last year like Atlas Iron, Iluka and Paladin have been rallying hard lately anyway on short-covering and beta chasing," said BBY institutional trader Anson Rosewall. Atlas, Iluka and Paladin shares jumped between 6 per cent and 7.8 per cent. Alumina shares surged 7.5 per cent on the news that Citic will buy a 13 per cent stake in the refiner in a share placement worth $452 million.
Rio Tinto jumped 2.3 per cent before its full-year results announcement. After the close Rio reported an underlying net profit for 2012 of $US9.3bn ($9bn) -- at the upper end of market expectations, which ranged from $US8.8bn to $US9.35bn.
Also impressing the market was engineering group Downer EDI, which jumped 7.8 per cent after reinstating its dividend and delivering a high-quality result for the first half.
Net profit after tax rose 24 per cent to $105.5m and gearing fell 20 per cent.
"We believe the high-quality result with a dividend yield established in a hungry market should see the stock propelled higher," said Nomura analyst Simon Thackray in a report.
Laggards included financials, healthcare, utilities, property trusts, consumer discretionary and telecommunications companies.
Commonwealth Bank of Australia fell 0.3 per cent and CSL shed 1.4 per cent after UBS cut the blood-products and vaccines maker to neutral from buy.
"What you are seeing today is a classic rotation from banks to resources after a strong outperformance from banks in the past three years," said Wilson Asset Management portfolio manager Chris Stott.
"That's to do with growing expectations that China's economic growth will be stronger this year than the consensus estimate."
Mr Stott said the S&P/ASX 200 could reach 5500 this year.
The Australian dollar was little changed yesterday with Chinese New Year celebrations still dulling trading across Asia, and no fresh local economic data to steer the market.
At 5pm AEDT, the dollar was trading at $US1.0350, up US0.11c. It touched an intraday low of $US1.0344.
Sentiment across markets in Asia was generally positive despite the slow trading, with share prices nudging higher in Sydney and Tokyo, even in the face of weaker than expected Japanese economic growth data.
Japan's real GDP fell in the October-December period for the third straight quarter.
