The sharemarket rose after a report showed falling interest rates were lifting parts of the nation's housing market, while manufacturing data from China indicated that an economic recovery remained on track.
BHP Billiton, the world's largest mining company, rose 1.2 per cent and rival Rio Tinto rose 1.3 per cent. Australia's banks, media companies and retailers rose after RP Data-Rismark said capital-city house prices rose 1.2 per cent in January, eclipsing December's decline.
Commonwealth Bank of Australia, Westpac, Seven West Media, Ten Network, Harvey Norman and Pacific Brands closed up 0.9 per cent to 5 per cent. National Australia Bank rose 2.3 per cent after Citi upgraded its rating from neutral to buy on the potential for asset sales, cost cuts and management changes.
The benchmark S&P/ASX 200 finished up 0.9 per cent at 4921.1 points after hitting a fresh 21-month intraday high of 4922.6. The gauge climbed 4.9 per cent last month, giving it the strongest start to the year since 1994.
"The housing data is helping," said Shane Oliver, director of investment strategy and chief economist at AMP Capital. "It's taken a while for things to pick up, but it's a sign that the series of rate cuts are slowly starting to do the job of boosting the economy. The China figures haven't changed my view that the economy there is still on track for a recovery."
China's official manufacturing PMI slipped to 50.4 versus 51.0 expected by the market, while HSBC's final PMI was revised up to 52.3 versus a consensus expectation of 52.0.
BHP Billiton, Rio Tinto and Fortescue Metals rose 1.2 per cent to 2.4 per cent after spot iron ore rose 1 per cent to $US152.50 overnight as Chinese buyers stockpiled ore before the Chinese New Year holidays which start next week.
The housing data gave a strong sign that a string of interest-rate cuts by the Reserve Bank of Australia over the past year was helping to lift an economy being weakened by a cooling resource boom.
Telstra, Westfield and Macquarie Group rose 1 per cent to 2.1 per cent, which some traders attributed to momentum buying after strong gains last year.
Notwithstanding potential concern over US budget negotiations, Italian elections and the domestic earnings reporting season next month, Mr Oliver recommended buying dips in the market.
"The global growth outlook is steadily improving, global monetary conditions are ultra easy, investors are switching out of low-yielding cash and bonds, valuations remain reasonable and RBA rate cuts will start to benefit domestic cyclical sectors," he said in a report.
The market was awaiting the overnight release of US non-farm payrolls data, which was expected to show employment rose by 166,000 and that the unemployment rate remained steady at 7.8 per cent last month.
On the domestic front, the RBA was due to meet next Tuesday, while the Australian corporate earnings period was due to get under way next week.
