SYDNEY: Australian shares rose to their highest close in more than 17 months on Wednesday, lifted by strong metal prices and optimism over US budget talks to avoid the "fiscal cliff" of automatic spending cuts and tax increases.
Top miners BHP Billiton Ltd and Rio Tinto Ltd jumped 1.1 percent and 1.6 percent respectively.
The benchmark S&P/ASX 200 index was up 22.6 points to 4,617.8, the highest close since July 8, 2011.
"Markets are in a feel-good mode about the fiscal cliff discussions," said Ric Spooner, market strategist at CMC Markets.
"Traders don't want to get left behind on any end-of-year rallies. It's been a prosperous December so far and it's continued today," he said.
US stocks rallied on strong volume on Tuesday, capping off the S&P 500's best two-day run in a month, on confidence that a deal would be struck in Washington to avoid the painful spending cuts and tax hikes that could hurt the economy.
"US leaders are much closer to a deal with House Speaker John Boehner's Plan B effort that is getting some attention," said Stan Shamu, a market analyst at IG Markets.
"It is clear that leaders are willing to negotiate and as a result there is optimism that they can find some middle ground."
Defensive stocks were also strong, with telecommunications giant Telstra up 0.9 percent, while supermarket retailer Wesfarmer rose 0.6 percent.
OZ Minerals dropped 9.8 percent, their biggest one-day loss in 3 and 1/2 years, on talk that analysts were cutting forecasts for production and earnings. OZ Minerals' spokeswoman was not immediately available for comment.
Whitehaven Coal Ltd rallied 8.1 percent after the company said it had held talks with China's Shenhua Group about a potential corporate or asset deal.
Surfwear company Billabong International plunged 13.3 percent after it said it received a $556 million takeover bid for the company at A$1.10 a share, but also cut its earnings guidance.
New Zealand's benchmark NZX 50 index jumped 1.1 percent to close 43.8 points higher at 4,023.
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