The benchmark S&P/ASX 200 index soared 2.1 per cent to 5358.8 points, for the first time this year closing higher than where it ended last year, while the broader All Ordinaries gained 1.9 per cent to 5415.0.

"The Reserve Bank cut rates to 1.75 per cent and that meant strong gains across the board," said Matthew MacDonald, private client advisor at Morgans.

"The Aussie dollar fell 1.3 per cent on yesterday so that's meant anything in US dollar denominations - companies like CSL - have all been very strong."

Mr MacDonald said the ANZ result, even though it was not great, had boosted the banks.

"I think the result has provided clarity to the market," he said.

"There's been a lot of speculation in the media for some time which has been a drag on the banks, but I think the numbers coming out today has provided clarity around the situation."

The initial 4 per cent drop in ANZ was seized by bargain hunters, he said. "It opened weak but investors snapped up those prices."

The Reserve Bank's decision to cut the cash rate to a record low of 1.75 per cent, in a bid to head off falling prices and an economic downturn, pushed the bourse up well over 1 per cent in afternoon trade.

The cut, the first in a year, came less than a week after a shock drop in core inflation to well below the central bank's 2 per cent to 3 per cent target band.

The historic interest rate reduction coincides with the federal government's third budget - due to be released Tuesday night - which is expected to be mildly stimulatory despite pressure to narrow the deficit.

Earlier in the day, ANZ Banking Group cut its interim dividend and posted a sharp drop in half-year profits as chief executive Shayne Elliott unveiled $717 million in one-off charges that he said would put the bank on a stronger footing for a more subdued operating environment.

ANZ's cash profit fell 24 per cent to $2.8 billion, including $717 million in charges, while the bank said it would pay an interim dividend of 80c a share - down from 86c last year - and target a lower dividend payout ratio.

It is the first time ANZ has cut its dividend since the global financial crisis in 2009.

"Overall, while the result was a slight miss, it is pleasing to see ANZ taking the right actions to address the market's concerns," said Watermark Funds Management banking analyst Omkar Joshi.

The bank's share price plunged 4 per cent at the open, but finished the day 5.5 per cent higher at $25.05, a remarkable turnaround of nearly 10 per cent.

The other big banks were buoyed by the result. Commonwealth Bank rose 3.7 per cent to $75.02, National Australia Bank gained 3.7 per cent to $27.63 and Westpac Banking Corporation lifted 2.3 per cent to $30.65.

Blue-chip miners fell - BHP BIlliton 0.9 per cent to $20.73 and Rio Tinto 1.2 per cent to $51.75. Fellow blue-chip Telstra put on 2.3 per cent to $5.64 and CSL firmed 3.2 per cent to $109.45.

Woolworths chief Brad Banducci's turnaround plan for Australia's biggest supermarket chain is yet to translate into sales, with news the grocery giant lost share to competitors Coles, Aldi and Costco across the third quarter.

Same-store food and liquor sales for the period tracked backwards by 0.9 per cent, adjusted for Easter, and analysts have warned the Woolworths chief executive might have to spend more to bring the shoppers back to the embattled supermarket brand.

Woolworths put on 0.1 per cent to $22.27 while competitor Wesfarmers edged up 1.1 per cent to $43.43.

Online action sports retailer Surfstitch slumped 53.6 per cent to 48 cents after slashing full-year profit guidance, warning that EBITDA is expected to plunge at least 61 per cent to between $2 million and $3 million for the year ending June.

The new guidance compares with Surfstitch's original forecasts between $15 million and $18 million and the $7.7 million result achieved in 2015, the retailer's first year as a public company.

The profit downgrade came almost two months after the shock departure of co-founder and chief executive Justin Cameron, who quit to pursue a privatisation bid.