SYDNEY (Thomson Financial) - Australian shares were slightly higher in early trade on Wednesday led by miners following

overnight gains in base metal prices with Rio Tinto leading the advance on renewed talk that BHP Billiton might boost its offer for the world's third-largest mining company.

'The market's reasonably flat but there's some strength in the mining sector following higher commodity prices -- there's also talk overnight that BHP might offer more for Rio Tinto but that's only chatter,' said Savanth Sebastian, an equities analyst at CommSec.

At 11:05 a.m. (0105 GMT) the S&P/ASX 200 was up 5.5 points or 0.1 percent to 5,818.4 while the All Ordinaries index was up 7.8 points or 0.1 percent at 5,891.0.

Rio Tinto rose 3.3 percent to A$149.32 while BHP Billiton gained 2.2 percent to A$46.78.

Sebastian said the mining sector stood to benefit from last night's fiscal budget delivered by the centre-left federal government led by Prime Minister Kevin Rudd, which included a A$20 billion boost to spending on infrastructure.

He said the plan was likely to include spending on rail and port infrastructure which would remove bottlenecks currently impeding exports of commodities, including coal.

Banks were lower, reflecting weakness in the U.S. financial sector following comments by

Federal Reserve Chairman Ben Bernanke that strong demand by financial institutions for funds provided by the Fed showed 'markets are still far from normal'.

'There's also been switching out of Westpac because of uncertainty about its offer for rival St.

George and what sort of synergies will be extracted,' said Sebastian.

On Tuesday, Westpac announced an all-share 1.31-for-1 offer for St. George, valuing the nation's fifth-largest bank at about A$18.6 billion.

The offer, which has the backing of the St. George board, will not be earnings accretive for Westpac until the third year after completion. Westpac also has to overcome significant regulatory hurdles to complete the takeover.

Westpac was down 1.5 percent at A$24.74 while St. George was off 0.2 percent at A$33.29 after jumping more than 25 percent Tuesday after details of Westpac's offer were announced.

National Australia Bank was down 2.0 percent at A$33.69, Commonwealth Bank was off 0.8

percent at A$44.99 and ANZ dropped 1.0 percent to A$22.90.

The telecommunications sector was firmer after the federal government reaffirmed its plans to

support the development of a faster nationwide broadband service in last night's budget, said Sebastian.

Singapore Telecommunications reporting stronger-than-expected full-year earnings, partly helped by a solid performance of its Australian unit Optus, was also lending support to the sector, he said.

Optus, Australia's second-largest telecommunications provider, increased mobile phone customers by 5.9 percent in the year to March.

SingTel was up A$0.01 at A$2.92 while Australia's leading teleco, Telstra, advanced 1.6 percent

to A$4.60 and its T3 receipts were 2.4 percent higher at A$2.99.

($1 = A$1.05)

bruce.hextall@thomsonreuters.com

bhx/ms

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