Australian shares surged to a two-month high on Wednesday as softer-than-expected U.S. inflation and positive economic data from China pulled investors back into riskier assets.

The benchmark index S&P/ASX 200 closed 1.4% higher at 7,105.900, its highest closing level since Sept. 20 and best day since Sept. 15.

U.S. consumer prices were unchanged in October and the annual rise in underlying inflation was the smallest in two years, bolstering the view that the Federal Reserve was probably done raising interest rates.

"The Reserve Bank of Australia (RBA) is a little further behind on the interest rate curve as well as in terms of where the inflation rate currently stands with regards to the Federal Open Market Committee," said Tim Waterer, chief market analyst at KCM Trade.

"So, while its encouraging to see that the Fed are slowly getting a handle on inflation, the RBA still has further to go with respect to getting CPI back to the 2% target," Waterer added.

Investor confidence was further boosted by strong economic data from China, Australia's top trading partner, as well as a persistent dovish central bank.

Australian wages posted the largest increase on record last quarter on a sharp rise in minimum wages. However, analysts at ANZ Group do not expect this to change the central bank's thinking ahead of its December meeting.

ANZ analysts expect the RBA to hold the key cash rate at 4.35% on Dec. 5.

The heavyweight mining index surged 2.4% to clock its best day in two months. BHP Group, Rio Tinto , and Fortescue rose between 1.8% and 3.5% on boosts to iron ore prices from the China data.

Among other sectors, banks gained 0.5%, tech stocks advanced 3.4%, while real estate stocks jumped 4.6%.

The New Zealand benchmark S&P/NZX 50 index rose 1.6% to 11,352.84, highest closing level since Sept. 25. (Reporting by Roshan Thomas in Bengaluru; Editing by Varun H K)