The benchmark S&P/ASX200 index ended 72.7 points, or 1.11 per cent higher, at 6,612.6 on Monday.
The broader All Ordinaries rose 76.5 points, or 1.14 per cent, to 6,796.9.
"It is very much in line with market expectation now that there will be a significant rate hike. So to some extent, the market sentiment is a bit calmer," said Lucinda Chan, division director at Macquarie Private Wealth.
"I don't think the volatility is going away, it's just that we are getting a bit of a breather," she added.
Local investors took their early cues from a solid session on Wall Street on Friday that saw the three main indices end higher ahead of a long weekend. The US market will be closed on Monday for the Independence Day public holiday.
The heavyweight financial sector led the gains in the local market, with rises in energy, property and healthcare stocks also bolstering the indices.
Economists widely expect the RBA to hike its cash rate by another 50 basis points on Tuesday to tame surging inflation, which hit a 20-year peak in the first three months of this year.
Robust retail sales and strong job vacancies data last week has further strengthened the case for the central bank to move quickly away from emergency settings, NAB analysts said in a note.
Each of the Big Four banks still ended around 1 per cent up despite the prospect of a sharp rate hike.
Energy stocks were lifted by a 2 per cent rise in oil prices over the weekend amid supply concerns. Sector leaders Woodside and Santos notched up gains of 2.5 per cent each, while Beach Energy rose 2 per cent.
Property trusts also lifted, with Goodman Group, Cromwell Property and GPT all climbing more than two per cent each.
The healthcare sector further boosted the market with Resmed, CSL and Ansell up between 1.5 per cent and 3 per cent.
Mining shares remained mixed. While top miner BHP was down 0.4 per cent at $39.90, Rio Tinto and Fortescue metals were up around 0.4 per cent each.
Gold producers also had a strong session with Newcrest, Northern Star, and Evolution recording gains between 2-3 per cent.
On the negative side, Magellan Financial slid nearly 10 per cent to $11.71 after reports that its top sales executive would be departing the company next year.
Shares in Link Administration also ended in negative territory after the company declined to recommend a lowered takeover bid by Canada's Dye & Durham Ltd to shareholders.
Meanwhile, the Australian dollar recovered from near two-year lows to strengthen somewhat in late trading. The local currency was buying 68.40 US cents at 1700 AEST, from 68.13 US cents at Friday's close.
ON THE ASX:
* The benchmark S&P/ASX200 index ended 72.7 points, or 1.11 per cent higher, at 6,612.6 on Monday.
* The broader All Ordinaries rose 76.5 points, or 1.14 per cent, to 6,796.9.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 68.40 US cents, from 68.13 US cents at Friday's close
* 92.63 Japanese yen, from 92.06 yen
* 65.62 Euro cents, from 65.22 cents
* 56.50 British pence, from 56.26 pence
* 109.72 NZ cents, from 110.16 cents
