The Australian sharemarket closed at a 19-month high as firming expectations of a February interest rate cut helped banking stocks.

At the close today, the benchmark S&P/ASX 200 index was 18.3 points, or 0.38 per cent, higher at 4756.6 while the broader All Ordinaries index was up 14.7 points, or 0.31 per cent, at 4779.7.

It was the S&P/ASX 200's highest close since it finished the local trading day at 4780.2 points on May 11, 2011.

On the ASX 24, the March share price index futures contract was 16 points higher at 4721, with 31,483 contracts traded.

Banking stocks performed strongly, following Australian Bureau of Statistics data showing the national unemployment rate rising by 0.1 percentage points to 5.4 per cent in December.

City Index chief market analyst Peter Esho said the economic news helped banking stocks, as financial markets firmed their expectations for a near-term rate cut.

"We're more likely to see the Reserve Bank move in February," he said.

"It will help the banks with their margins and it will make dividend yields more attractive."

Mr Esho said lower mortgage rates meant banks could deliver lower interest rates on deposits.

ANZ Banking Group posted the strongest gains, rising by 21c, or 0.83 per cent, to finish at $25.57.

National Australia Bank climbed by 19c, or 0.74 per cent, to close at $26.04 while Westpac, which also gained 19c, or 0.72 per cent, ended at $26.62.

The Commonwealth Bank added 17c, or 0.27 per cent, to finish at $62.46.

The energy sector in general also performed strongly after Woodside Petroleum revealed production and revenue had risen by about 30 per cent in 2012 to new records, because of its massive Pluto liquefied natural gas operations in Western Australia.

Oil and gas company Santos also revealed it was on track to meet its 2013 production forecasts after enjoying a 10 per cent rise in 2012.

Woodside shares, however, finished flat at $35.20, after earlier hitting an intraday high of $35.56 during late morning trade.

Santos, meanwhile, finished up 8c, or 0.69 per cent, at $11.72.

Uranium miner Paladin Energy's share closed 3c, or 2.6 per cent, higher at $1.185 after it revealed it was on track to meet full-year production targets.

Billabong shares closed 4.66 per cent firmer at $1.01, two days after the stock soared when US retailer VF Corporation's takeover bid stirred hopes of a bidding war.

Conversely, Qantas shares finished 1.3 per cent weaker, despite earlier gains, after the Australian Competition & Consumer Commission gave interim authorisation of the airline's alliance with Emirates.

National turnover was 1.427 billion shares worth $4.146 billion with 483 shares higher, 482 lower and 361 unchanged.