The Australian market finished on a 16-month closing high as US politicians appeared to make progress on their budget negotiations .
At close on Tuesday, the benchmark S&P/ASX200 index was up 21.8 points, or 0.48 per cent, at 4,595.2 points, while the broader All Ordinaries index had risen 22.5 points, or 0.49 per cent, to 4,610.5 points.
On the ASX 24, the December share price index futures contract was 29 points higher at 4,602 points, with 167,860 contracts traded.
Australian Stock Report head of research Geoff Saffer said the Australian market had its highest close since late July 2011 after US politicians appeared to be making progress on their "fiscal cliff" negotiations.
Just two weeks remain before tax increases and government spending cuts, referred to as the fiscal cliff, start taking effect in the US if no deal is reached.
"I think it was mainly widespread buying today on hopes that US politicians will reach a compromise before the end of the year," he said.
Mr Saffer said the Reserve Bank of Australia's minutes of its December board meeting also suggested that the cash rate could be cut further in 2013 which prompted investor buying.
The Australian market recorded gains across the board with mining, utilities and healthcare the best performing sectors.
BHP Billiton jumped 31 cents to $36.66, Rio Tinto soared $1.18 to $64.70 and Fortescue gained 13 cents to $4.60.
The four major banks all finished in positive territory.
ANZ was up two cents to $24.51, National Australia Bank gained 12 cents to $24.60, Westpac added six cents to $25.81 and Commonwealth Bank jumped 16 cents to $61.45.
The spot price of Sydney gold closed at $US1,702.59, up $US10.84 from Monday's close of $US1,691.75.
Market turnover was 1.77 billion securities worth $4.99 billion, with 536 stocks up, 434 down and 352 unchanged.