After being down by as much as 0.4 per cent in early trading on Friday, the benchmark S&P/ASX200 index climbed into the green after lunch to finish up 21.6 points, or 0.3 per cent, to 7,194.9.
The broader All Ordinaries gained 20.9 points, or 0.28 per cent, to 7,405.6.
The ASX200 climbed 1.7 per cent for the week, its best performance since a 2.2 per cent gain for the week ending November 3.
AMP chief economist Shane Oliver said that while shares remained vulnerable to pullbacks or short-term consolidation after their strong gains since October, they were likely to overall see more upside in the months ahead.
Inflation was easing, monetary policies were turning progressively less threatening, economic indicators remained consistent for a soft landing and geopolitical threats would likely take a back seat for a while, Dr Oliver said.
Positive seasonality also remained in place, with a "Santa Rally" usually kicking in later this month, he said.
"So while we should expect lots of bumps along the way, our base case remains that global and Australian shares can trend up."
Seven of the ASX's 11 sectors finished higher, with energy the biggest gainer, climbing 1.0 per cent after Australia's top two energy companies confirmed on Thursday night they were in early merger talks.
Woodside slipped 0.5 per cent to $29.81 while Santos rose 6.2 per cent to $7.25 as both confirmed the Australian Financial Review's reporting about the possible $79 billion deal.
"There is no certainty that any transaction will eventuate from these discussions," Santos said.
The Big Four banks mostly finished little changed, with ANZ, Westpac and NAB closing basically flat, while CBA edged 0.2 per cetn higher at $106.44.
In the heavyweight mining sector, BHP rose 0.7 per cent to $47.74, Fortescue added 1.1 per cent to $25.75 and Rio Tinto climbed 0.9 per cent to $128.89..
Lithium miners posted strong gains on early indications that prices for the battery metal had finally hit bottom.
Pilbara rose 3.6 per cent, Allkem rose 4.3 per cent and Lionton Resources added 4.2 per cent.
The Australian dollar was buying 66.13 US cents, from 65.31 US cents at Thursday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Friday up 21.6 points, or 0.3 per cent, to 7,194.9.
* The broader All Ordinaries gained 20.9 points, or 0.28 per cent, to 7,405.6.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.13 US cents, from 65.31 US cents at Thursday's ASX close
* 95.20 Japanese yen, from 95.82 Japanese yen
* 61.33 Euro cents, from 60.68 Euro cents
* 52.54 British pence, from 52.20 pence
* 107.29 NZ cents, from 106.67 NZ cents.
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