The sharemarket has hit post-financial-crisis highs after a surprisingly low inflation report and a rally in the big banks' stocks continued.
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The benchmark S&P/ASX 200 Index rose 38.49 points, or 0.7 per cent, to 5517.8, while the broader All Ordinaries Index firmed 35.06 points, or 0.6 per cent, to 5507.8. It was the benchmark's highest level since May 2008 - and market strategists believe the rally has further to run.
The gains came after consumer price inflation was lower than expected for the March quarter at 0.6 per cent. This took the annual rate of growth for headline inflation to 2.9 per cent - below analysts' expectations of 3.2 per cent - lessening the chance of interest rate rises.
Westpac and ANZ hit record highs, both rising 0.9 per cent to $35.62 and $34.59 respectively.
Macquarie Private Wealth division director Martin Lakos said if the banks were a barometer for the health of the economy, it would point to further gains on the sharemarket.
Mr Lakos said Macquarie was forecasting the ASX 200 to finish the year at about 5900 points, with gains driven by stronger earnings and a softer dollar.
''The economy is starting to turn up: it's clearly at a slow pace, it's not a runaway story, but definitely things are starting to improve,'' he said. The ASX began its climb in February from 5200 points, mainly driven by upgrades from big banks.
''The upgrades in the bank sector, along with the improving economy, suggest bank earnings will continue to rise,'' Mr Lakos said.
The resource sector traded slightly weaker than the broader market, rising 0.5 per cent, despite the easing of China's manufacturing downturn.
HSBC/Markit's flash Purchasing Managers Index rose to 48.3 in April from 48 in March, which was an eight-month low. A reading below 50 suggests a contraction.
But Mr Lakos was bullish about China, with steel mills there carrying about 22 days' stock, which suggests they'll start buying iron ore again. BHP Billiton was 0.5 per cent higher at $38.20, while Rio Tinto rose 0.08 per cent to $62.79.
Fortescue Metals Group fell 1.3 per cent to $5.25. This compared with Macquarie's target of $6.30.
Australia's biggest gold producer, Newcrest, jumped 1 per cent to $10.12 after it reported an 11 per cent fall in its March-quarter gold production but maintained its full-year guidance.
