The sharemarket posted strong gains amid signs politicians in the US might soon reach a deal over the budget impasse and debt ceiling.
The benchmark S&P/ASX200 Index rose 51.2 points, or 0.98 per cent, to 5259.1, while the broader All Ordinaries rose 52.7 points, or 1.01 per cent, to 5259.2.
The prospect of a deal in the US had buoyed investors, Lonsec client adviser Michael Heffernan said.
"That's clearly the main factor at play," he said. "The US has got the money to pay the bills, they've just saddled themselves with an artificial construct." Mr Heffernan said the local market was approaching a new five-year high as materials, energy, industrials and financial stocks continued to rise.
BHP Billiton rose 34¢ to $35.40, Fortescue Metals rose 29¢ to $5.26 and Rio Tinto rose $1.55 to $63.20 after it said it was confident of hitting its iron ore production target.
Among the banks, Westpac rose 29¢ to $33.24, ANZ rose 33¢ to $31.47, Commonwealth Bank rose 49¢ to $73.01 and NAB was 25¢ higher at $35.01.
Telstra was 7¢ higher at $5 as it maintained its forecasts of low single-digit income and earnings growth this financial year.
Tabcorp was steady at $3.25 after its revenue in the September quarter rose by more than 3 per cent. Crown shares rose 59¢ to $16.44 and Echo Entertainment fell 13¢ to $2.59, after the Queensland government raised the prospect of issuing new casino licences.
Gold was $US1269.49 an ounce, down $US4.01.
The prospect of a deal on US debt also buoyed the dollar, which was trading late on Tuesday at US95.33¢, up from US94.67¢.