[SYDNEY] Australian shares rose on Tuesday as bank stocks bounced back from the previous session while investors waited for news from the Reserve Bank of Australia's monetary policy meeting.

Most economists expect the RBA to keep rates on hold at Tuesday's meeting, boosting the local dollar.

Bank stocks rallied as investors suspected the sector may have been oversold the previous session, and that a recent decision by major banks to raise their mortgage rates will help offset a slowdown in profit growth.

The S&P/ASX 200 index was up 1.3 per cent or 65.7 points at 5,231.5 by 0120 GMT. The benchmark is down 3.3 per cent so far in 2015. "There was a lot of negativity in the banking sector yesterday, perhaps a little overdone," said IG Markets analyst Angus Nicholson. "It's a big retracement, and that's really helped send the market back up." Of the so-called "Big Four" banks, Commonwealth Bank of Australia, Westpac Banking Corp and Australia and New Zealand Banking Group were 1.5 per cent higher, while National Australia Bank added 0.9 per cent.

Energy stocks also firmed followed a recovery in the oil price overnight. Woodside Petroleum was up 1.8 per cent and Origin Energy gained 1.9 per cent while Santos jumped 4 per cent following a major asset sale.

Iron ore miner BHP Billiton led resources higher, up 1.6 per cent, while rival Rio Tinto gained 0.9 per cent and BHP spin-off South32 was up 2 per cent.

Telecoms giant Telstra was up 2 per cent, a respite following a decline of close to 20 per cent since early August on concerns about its long-term growth prospects.

Pension services company Link Administration fell 0.4 per cent below its issue price in its market debut after raising A$950 million in Australia's biggest initial public offering of the year.

New Zealand's benchmark NZX 50 index rose 0.4 per cent or 22.34 points to 6,006.18, not far from an all-time high touched last week. The index is up nearly 8 per cent this year, far outperforming the Australian benchmark.

The most actively traded stock was Spark New Zealand , up 1.4 per cent. NZX Ltd rose 1 per cent after Credit Suisse raised its rating to outperform.

Shares in farmer-owned dairy exporter Fonterra fell 0.7 per cent ahead of the global dairy auction Wednesday morning.

REUTERS