The benchmark S&P/ASX200 increased 61.9 points, or 1.56 per cent, to 4017.2 and the broader All Ordinaries gained 61.2 points, or 1.55 per cent, to 4009.3, its highest close since November 10.
"Everything has improved markedly and the data is giving us the right direction," Macquarie Equities associate director Lucinda Chan said.
Gross domestic product (GDP) rose 0.4 per cent in the March quarter, following a 0.6 per cent fall in December, according to the Australian Bureau of Statistics.
Australia avoided a recession, defined as two consecutive quarters of negative growth.
Ms Chan said other local data including export and retail figures, as well as overseas data, were showing that the global economy was starting to improve.
"There's a real feeling that if you don't buy now you'll miss out," she said.
Leading the index higher were property stocks, led by GPT Group.
GPT jumped six cents, or 12.5 per cent, to 54 cents after announcing the sale of close to $560 million worth of assets as it sought to restructure its business model.
Westfield, Australia's biggest property company, gained 71 cents, or 6.1 per cent, to $12.35, Lend Lease rose 45 cents, or 6.25 per cent, to $7.65 and Mirvac added 11 cents, or 9.02 per cent, to $1.33.
Property companies, which were among the hardest hit during the downturn, were attracting money now as many had recapitalised through equity raisings, Ms Chan said.
Adding to the market's gains, mining giant Rio Tinto rose $2.60, or 3.77 per cent, to $71.60, while rival and Australia's biggest company, BHP Billiton, added 33 cents to $37.03.
The major banks rose. Commonwealth Bank put on 47 cents to $36.80, Westpac rose 41 cents, or 2.19 per cent, to $19.17, ANZ gained 38 cents, or 2.38 per cent, to $16.36 and NAB increased 31 cent to $23.11.
Other companies that added to the overall gain included Telstra, rising 14 cents to $3.21, Harvey Norman, increasing 18 cents, or 5.77 per cent, to $3.30 and Crown, adding 43 cents, or 6.04 per cent, at $7.55.
"There's a lot of money on the side still and cash is not earning the returns we want," Ms Chan said.
At 12:03 pm (AEST0, the spot price of gold in Sydney was $US985.15 per fine ounce, up $US13.85 on yesterday's close of $US971.30.
Among the gold miners, Newcrest rose 51 cents to $34.40 but Lihir fell one cent to $3.29.
Stocks to buck the upwards trend included Wesfarmers, owner of Coles and Bunnings, falling 51 cents, or 2.18 per cent, to $22.86, insurer QBE, declining 28 cents, or 1.44 per cent, to $19.14, Toll Holdings, which declined 17 cents, or 2.28 per cent, to $7.29, and Incitec Pivot, which lost 11 cents, or 3.85 per cent, to $2.75.
On the Sydney Futures Exchange as of 1619 AEST, the June share price index contract was 55 points higher at 4015 on a volume of 26,937 contracts.
