A rally among the big three iron ore miners powered the Australian sharemarket to its best start to a fourth quarter since 2015.

The S&P/ASX200 Index gained 56.9 points, or 1 per cent, to 5872.9 points in a broad-based rally that helped erase some of Wednesday's 2.3 per cent decline.

The advance was the strongest on the first day of the fourth quarter since 2015 when the benchmark gained 1.8 per cent.

A rebound in iron ore prices lifted the big three miners. BHP added 1.9 per cent, Fortescue gained 2.3 per cent and Rio Tinto rose 1.2 per cent.

Iron ore has rallied to $US123 a tonne from a $US113 a tonne last week as the latest purchasing managers index showed China's economy continue to recover.

Production from Brazilian giant Vale has been affected by a recent court ruling.

Shares in Reliance Worldwide surged 10.5 per cent after the owner of plumbing and heating systems outlets issued a bumper sales upgrade triggered by COVID-induced lockdowns.

Reliance said sales are continuing to surge in its big northern hemisphere markets due to do-it-yourself repairs and renovations as people stay home during the pandemic.

Rare earths miner Lynas Corp rallied 5.2 per cent after US President Donald Trump moved to allow direct government investment in critical minerals projects in Australia.

Banks also made gains as the value of loans frozen by borrowers hit by the virus crisis fell by 5 per cent over August as the impact of the Victorian lockdown slowed the return of borrowers to making full repayments.

Data from the Australian Prudential Regulation Authority showed the value of deferred loans fell over the month of August by 5 per cent to $229 billion from $240 billion.

Commonwealth Bank gained 0.7 per cent and Westpac rose 0.5 per cent.