SYDNEY: Australian shares settled higher on Tuesday as sentiment was boosted by a report that banks would be required to take up more debt from the government to aid stimulus measures to combat the economic damage from the Covid-19 pandemic.

The S&P/ASX 200 index rose 1.1% to 6,007.8 at the close of trade, with US S&P 500 futures up 0.5%.

The country's "Big Four" banks - Commonwealth Bank of Australia, National Australia Bank, Australia and New Zealand Banking Group and Westpac Banking Corp - rose between 1.3% and 1.7%.

Markets shrugged off data that showed soft August business conditions data due to the Victoria lockdowns and weak employment figures over the month to Aug. 22.

Healthcare stocks finished 1.5% higher, with gains led by biotech company CSL, up 2.1%.

Industry heavyweights Woodside Petroleum and Santos gained 1.% and 1.8%, respectively, and led gains on the energy sub-index.

New Zealand's benchmark S&P/NZX 50 index rose 0.3% to finish the session at 11,895.63, with financial companies rising the most.

Investors are probably looking forward to a possible rebound in US stocks after a sell-off last week, said Henry Jennings, analyst at Marcustoday.