Australian shares rose on Tuesday, as the central bank held its cash rate at a record low and pushed back on market wagers for an early rate hike while ending its bond buying programme.

The S&P/ASX 200 index closed 0.5% higher at 7,006, helped by gains in banking and gold stocks. It fell about 6.4% in January, marking its biggest monthly drop since March 2020.

The Reserve Bank of Australia kept its cash rate at a record low of 0.1% and said the last bond purchase under its A$275 billion ($194.48 billion) bond buying campaign would take place on Feb. 10.

The central bank emphasised that an end to quantitative easing did not signal a near-term rate hike, and it was prepared to wait until inflation picked up.

Banks closed 1.2% higher as the central bank brought no last-minute surprises, with three of the "Big Four" banks advancing between 0.2% and 1.9%, while Australia and New Zealand Banking Group closed flat.

"It seems that banks have to wait a little longer for a recovery in their lending margins. At the same time, one cannot guarantee that a rise in short-term interest rates will deliver a much-needed bounce to the margins" said Kunal Sawhney, chief executive of Kalkine Group.

Banks, miners weigh on Australia shares ahead of RBA meeting

Gold stocks rose 2.6% after shedding 11.8% in January. Newcrest Mining surged as much as 3.5%, while Northern Star added 2.2%.

Miners, however, lost 1.3%, with BHP Group declining 3.1%.

Building materials maker Boral Ltd advanced 5.8% after saying it would return A$3 billion to shareholders, using mostly proceeds from the sale of several North American businesses.

New Zealand's benchmark S&P/NZX 50 index rose 1.4% to 12,058.94 in its best session since early December 2021.