Wall Street gave Australian investors their lead Wednesday, propelling the market to a 2.8-per-cent gain, dpa reported.
The ASX 200 added 121 points to close at 4,336 as buyers piled into mining stocks.
Market leader BHP Billiton Ltd was up 8 per cent along with resources rival and takeover target Rio Tinto Ltd.
The rise didn't match the more than 3-per-cent gains in the United States because of fears that Tuesday's larger-than-expected interest rate cut of 75 basis points by the Reserve Bank of Australia signalled a gloomier-than-expected view of economic prospects.
DJ Carmichael researcher Peter Koperts said most analysts had predicted a 50-basis-points reduction and the bigger cut to 5.25 per cent was an indication that the central bank had grave fears for the economy.
"Mortgagors will be happy, but for companies like BHP and Rio, it suggests there are problems with China, with everything else, and I'd be looking at it quite conservatively and be a little bit worried for the next six months," he said.