Australian shares advanced on Monday on rising hopes of a broader economic recovery after US lawmakers approved a budget outline for President Joe Biden's $1.9 trillion COVID-19 relief package, with heavyweight miners also benefiting from surging iron ore prices.

The approval will allow lawmakers to muscle Biden's plan through in the coming weeks without Republican support.

Comments by the US Treasury Secretary Janet Yellen further lifted sentiment, after she predicted that the United States would hit full employment next year if Congress could pass its support package.

The S&P/ASX 200 index rose 0.6% to 6,880.7 at the close of trade.

Higher iron ore prices helped miners outperform all other sectors on the benchmark, as a positive demand outlook for the steelmaking ingredient in the world's top steel producer China buoyed prices.

The subindex rose 2.1%, with global miners BHP Group and Rio Tinto gaining 2.4% and 3.4%, respectively.

Tech stocks advanced 0.8%, with buy-now-pay-later company Afterpay rising 1.4%, and property advertisement website REA Group up 3.2%.

Energy stocks were also higher, helped by a rise in oil prices as supply cuts among key producers and hopes for further US economic stimulus measures helped.

Oil & gas explorers Woodside Petroleum and Santos Ltd were up 0.6% and 1.9%, respectively.

Meanwhile, fibre and network solutions provider Vocus Group was among the top gainers on the benchmark index after it said Macquarie's funds had lodged an offer to acquire the company for A$3.42 billion ($2.62 billion).

The number of issues on the ASX that advanced were 1,007 while 825 declined.

New Zealand's stock market was closed for a public holiday.