Top banks rallied, led by Westpac Banking Corp with a 2 percent gain to AUS$22.26, its highest close since May 20.
The New Zealand dollar powered to a post-float high against the greenback on Thursday, while the Australian dollar scaled a 26-year peak on sterling as investors piled into risk assets.
"The risk trade is clearly back on with force," said Matt Lewis, dealer at CMC Markets.
"The fact that we have also seen the Aussie dollar smash through its recent range also points to a boost in investor confidence," he said.
Global stocks rallied after Greece's parliament approved the first of two austerity bills as it battles a debt crisis.
Australian Treasurer Wayne Swan said the Greek approval was a relief for markets.
"That's certainly welcome. It is really important that we do see a solution that is supported by markets. Also important is that we see markets have faith that the banking system in that country is supportive of these outcomes," Swan said on Thursday, addressing the Melbourne Institute.
The benchmark S&P/ASX 200 index rose 78.52 points to 4,608.0, according to the latest data, its first close above 4,600 since June 1. In percentage terms, it was the best one-day rally since Dec. 2.
The index fell 4.8 percent for the quarter, its first quarterly fall since dropping 12 percent a year ago. For the year to June 30, the index rose 7.1 percent.
"We do have short term softness but we have a strong medium-term outlook. We have an investment pipeline that is in the envy of the world," said Swan.
New Zealand's benchmark NZX 50 index advanced 1 percent to 3,448.4.
BHP Billiton rose 1.5 percent to AUS$43.80 while Rio Tinto jumped 1.8 percent to AUS$82.99.
Laboratory Group Campbell Brothers rallied 3.7 percent to AUS$45.76 after it agreed to buy Stewart Holdings Group, a UK-based provider of services to the mining and processing industries, for 146 million pounds ($234 million), fully debt funded.
"The market on a price-to-earnings and dividend yield basis is as cheap as it's been since the GFC (global financial crisis). Short sellers are locking in their profits just in case we have a good run up in the lead up to the profit season that starts in August," said Richard Morrow, a director at broker EL&C Baillieu.
Copyright Reuters, 2011