The world's twelfth-largest economy expanded an annual 3 percent in the last three months of 2015, well above both analysts' expectations for a flat reading and the previous period's 2.5 percent rise.
On a quarterly basis, Australia's gross domestic product (GDP) rose 0.6 percent, slower than the third quarter's 0.9 percent spike but still beating forecasts for a 0.4 percent gain.
The Australian dollar climbed 0.7 percent to $0.7234 U.S. cents in reaction, while the benchmark equity index popped nearly 2 percent.
Gross fixed capital expenditure dropped 0.6 percent during the fourth quarter however, while final consumption spending rose 0.7 percent on a seasonally-adjusted basis.
The GDP report bolstered the Reserve Bank of Australia's (RBA) decision to keep interest rates at a record low of 2 percent.
On Tuesday the RBA left monetary policy steady for the tenth straight month, with Governor Glenn Stevens stating "there were reasonable prospects for continued growth in the economy."
Compared to other commodity-based economies, such as Canada, Australia's report card is strong but it remains below-trend for an economy that has averaged 3.3 percent annual growth since 1992.
Indeed, Wednesday's data won't completely erase concerns about the nation's outlook.
The country has seen a string of weak economic indicators in recent days, with figures on Tuesday showing net exports added nothing to Q4 GDP, missing forecasts for a contribution of 0.3 percentage points. Moreover, January employment figures revealed a loss of 7,900 jobs, with the unemployment rate spiking to 6 percent, from 5.8 percent in December.
"Our concerns are two-fold. First up, the real GDP data probably flatters the momentum in the economy. When you look at falling commodity prices and weak income growth, you get a softer picture," Andrew Ticehurst, executive director and rate strategist at Nomura Australia, told CNBC's Asia Squawk Box.
That macro view could force the RBA to cut rates by 25 basis points in May, Ticehurst said.
Tuesday's monetary policy statement confirmed that any move before April was unlikely as the RBA board awaited more inflation figures, the rate strategist added, calling the central bank "reluctant rate-cutters."
The International Monetary Fund forecasts the country to realize average annual real GDP growth of 2.9 percent between 2016 and 2020, which would be the highest among major advanced economies, according to a recent Australian Government report.
Benjamin Pedley, head of Asia investment strategy at HSBC Private Bank, warned that property would be key to growth going forward.
"The biggest contributor to GDP is housing, or housing-related factors. At about $240 billion a year, it's well above mining and financial services.... Housing is helping provide a buffer to a mining slowdown but is growth there sustainable?" he told CNBC's Street Signs.
February home prices ticked up 0.5 percent on a monthly basis, according to recent data from property consultant CoreLogic RP Data, down from a 0.9 percent rise in January.
"Peaking building approvals point to a slowing contribution to growth from housing construction in 2016-17, at the same time that mining investment will be continuing to fall," echoed Shane Oliver, head of investment strategy and chief economist at AMP Capital, in a report.
As a result, he expects growth to slip back to around 2.5 percent over the year ahead.