Australia's sharemarket posted strong gains as fears of a tough budget with the potential to dampen domestic growth were overridden by relief that geo-political tensions have been kept at bay and enthusiasm for policy reforms in China.

The benchmark S&P/ASX 200 Index lifted 50 points, or 0.9 per cent, on Tuesday to 5498.2, with the broader All Ordinaries Index also adding 0.9 per cent to 5475.4, with copper miners shining bright.

"Local shares lifted on a strong lead form offshore after equity markets in the United States followed European markets higher the night before in a relief rally after concerns about violence in Ukraine over the weekend went unrealised," Morgans private client adviser Alistair McCorquodale said.

"A positive reception to moves by Chinese policymakers to accelerate planned financial system reforms also supported shares, particularly the miners," he said.

A number of traders have attributed weakness in the local sharemarket over the past couple of weeks to caution ahead of what was expected to be a tough debut budget from the government on Tuesday night.

But Mr McCorquodale said many of his retired clients were planning to buy more shares in response to fiscal tightening.

"We expect Tuesday's budget to dampen economic growth meaning interest rates will stay low for longer," he said. "Self-funded retirees are worried they won't have enough capital to meet their income needs and so have a renewed focus on high-yield stocks such as Telstra and the banks.

The big four banks all rose on Tuesday despite new evidence of slower growth in mortgage lending as a reduction in state government incentives leads to fewer first home buyers entering the housing market. Australian Bureau of Statistics data showed the number of loans for owner occupiers fell 0.9 per cent in March, and the annual pace slowed to 7.3 per cent.

"Other ABS data confirmed housing demand remained buoyant through the beginning of 2014. Australia-wide capital city residential property prices rose 1.7 per cent in the March quarter. Annual growth was 10.9 per cent in the year to the March quarter, the strongest growth since mid-2010," St George Bank economist Janu Chansaid.

Commonwealth Bank of Australia, Westpac Banking Corporation, and ANZ Banking Group each gained 0.7 per cent to $79.90, $35.14 and $32.90 respectively. National Australia Bank lifted 0.9 per cent to $34.50. Westpac and NAB are both due to trade without the rights to their interim dividends on Thursday.

Other major stocks that helped buoy the bourse included Telstra Corporation up 0.8 per cent at $5.25, and CSL up 1.1 per cent at $70. Woolworths added 0.8 per cent to $36.85, while Wesfarmers, owner of Coles, rose 0.9 per cent to $43.21.

But it was the miners that did the most to lift the index, despite official data showing China's industrial production and retail sales figures were lower than expected in April, amid optimism that the government's latest commitments to market reforms will deter corporate defaults.

BHP Billiton lifted 2.2 per cent to $37.96, while main rival Rio Tinto added 3 per cent to $62.85 as the spot price for iron ore, landed in China, gained 0.3 per cent to $US103 a tonne.

Copper miner Panaust was the best-performing stock in the ASX 200, soaring 34.2 per cent to $2.12 after majority shareholder China's Guandong Rising lifted its takeover offer from $2.20 to $2.30 per share.

Smaller copper miners also lifted after copper futures lifted 2 per cent. OZ Minerals jumped 10 per cent to $4.08, and Sandfire Resources gained 7.5 per cent to $6.02.

Northern Star Resources rose 7.6 per cent to $1.20 after announcing its fourth mine acquisition this year in a deal it hopes will turn the company into Australia's second largest gold producer.

Australia's biggest oil producer Woodside Petroleum was also higher, up 0.9 per cent to $41.33 with Brent crude oil steady at $US108.41 a barrel.

Chemicals and explosives maker Orica dropped 3.9 per cent to a six-month low at $21.09 as the company told shareholders it no longer expects to beat its 2013 full year profit result in 2014 after showing first-half profit slumped $21 million to $242 million. Chief executive Ian Smith cited a slowdown in demand from customers in the coal mining sector and said the company would continue to cut costs including slashing more jobs.

Beverage and snack food company Coca-Cola Amatil lifted 1.1 per cent to $9.23 as new chief executive Alison Watkins told the annual general meeting "it would take some time" to reverse a two-year slide in earnings.

Southern Cross Media was the worst-performing stock in the ASX 200, shedding 4.3 per cent to $1.13, after Credit Suisse analyst reiterated her sell recommendation and lowered her 12 month target price on Friday.

Information technology was the best-performing sector, up 2.4 per cent, as sentiment toward local players was boosted by a recovery in the Nasdaq.