Australian shares have made strong gains in thin trading on the third last session of the year.

The benchmark ASX 200 index was up 1.47 per cent to 5,473.8 at the close, while the broader All Ordinaries had gained 1.44 per cent  to 5,447

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However, less than 200 million shares of the All Ordinaries index members had changed hands halfway through the session, a fraction of normal trading volumes with many brokers and investors on holiday.

Miners were leading the market gains, following both a positive lead from Wall Street at the end of last week and weekend news that Chinese authorities had further loosened banking restrictions, making it easier for financial institutions to lend.

The banking sector was also stronger as were retailers who basked in the news that the Christmas sales period was better than many expected and shoppers are supporting the post Christmas sales.

Pharmaceutical company Pharmaxis was the individual standout on the market, though, surging 50 per cent to 18 cents after entering into a distribution agreement with Chiesi Farmaceutici and settling a dispute with Novaquest Pharma Opportunities Fund III, including an amended financing agreement.

Market heavyweight Telstra was up 6c per cent to $6.02, while Qantas also continued a recent positive trend with a 2.6 per cent rise to $2.41.

The Australian dollar continues to put a dampener on overseas travel plans though, remaining stuck near recent multi-year lows at 81.25 US cents.