The Australian share market closed stronger today as resources stocks benefited from higher commodity prices and sentiment was buoyed by the strongest quarterly increase in new home starts in eight years.

The benchmark S&P/ASX200 index closed up 56 points, or 1.17 per cent, to 4,853.2 points, while the broader All Ordinaries index rose 57.8 points, or 1.2 per cent, to 4,866.9 points.

On the Sydney Futures Exchange at 1615 AEDT the March share price index contract was 47 points higher at 4,851 on a volume of 84,368 contracts.

The market began the day higher after news that US interest rates would stay at ultra low levels caused weakness in the US dollar.

That led to higher prices for commodities and a stronger Australian dollar.

The big miners benefited, with BHP Billiton up 55 cents, or 1.29 per cent, to $43.30 and rival Rio Tinto gained $1.20, or 1.59 per cent, to $76.70.

"The commodities did well overnight and that has translated into the resources today, which are a bit of standout," Austock Securities senior client adviser Michael Heffernan said.

"Then again it is the whole market that has benefited.

"Certainly the housing sector data that came out today was very strong indeed and I suppose that gives everyone a bit of confidence as to the way we're going."

New home starts nationally rose by a seasonally adjusted 15.1 per cent in the December quarter of 2009, the biggest quarterly increase since 2001, according to Australian Bureau of Statistics data.

The median market forecast was for a six per cent rise in dwelling commencements in the quarter.

Among construction-related stocks, Boral added 13 cents, or 2.41 per cent, to $5.52, James Hardie gained 26 cents, or 3.51 per cent, to $7.67, CSR dropped 0.5 of a cent to $1.675 and Leighton Holdings gained $1.48, or 3.86 per cent, to $39.85.

The energy and gold sectors were also buoyed by higher commodity prices.

Woodside Petroleum added $1.04 to $45.80, Oil Search gained 22 cents to $5.88 and gas giant Santos rose 21 cents to $14.34.

Among gold stocks, Lihir was up five cents to $3.11 and Newcrest added 61 cents to $34.13.

The spot price of gold in Sydney was US$1,127.60 per fine ounce at 1627 AEDT, up US$13.92 on Tuesday's close of US$1,113.68.

The big banks ended stronger.

Commonwealth Bank was up 46 cents to $56.14, ANZ added 46 cents to $24.61, Westpac rose 43 cents to $27.34 and National Australia Bank edged eight cents higher to $26.83.

Retail giant David Jones posted a 10.2 per cent rise in its first half profit and reaffirmed profit growth guidance for the next two years.

The result was "very workmanlike and robust", Mr Heffernan said.

David Jones shares added six cents to $5.13.

Among other retail stocks, Myer Holdings gained two cents to $3.53, Woolworths lifted 44 cents to $28.72 while Wesfarmers lost 45 cents to $31.10.

Grain marker AWB was one of the worst performers of the day after it downgraded its guidance for full year profit.

AWB shares lost 12 cents, or 11.37 per cent, to 93.5 cents.

Telstra shares closed two cents higher at $3.13, while rival Optus parent Singapore Telecommunications added two cents to $2.51.

The top traded stock by turnover was pharmaceuticals developer OBJ, with 205.6 million shares traded for a value of $12.2 million.

OBJ shares fell 0.4 cent, or 6.25 per cent, to six cents.

Preliminary national turnover reached 2.7 billion shares, worth $5.86 billion, with 636 stocks up, 431 down and 369 unchanged.