* Westpac jumps over 7%, top gainer on benchmark

* Aussie benchmark set for best week since Aug. 14

* NZ rises 0.9% on a weekly basis

Sept 25 (Reuters) - Australian shares climbed more than 1% on Friday, with the "Big Four" banks among top boost to the benchmark index, after the government said it would simplify bank lending rules to free up credit in a bid to stimulate the coronavirus-hit economy.

The S&P/ASX 200 index rose 1.5% to 5,964.60 by 0105 GMT, following a 0.8% slide on Thursday. For the week, the benchmark has risen 1.7% so far, and was set for its biggest weekly gain since Aug. 14.

The heavyweight financial index gained over 3% and was set for its best session since June 16, after the government announced to ease lending rules.

The changes will ease the regulatory burden and reduce the cost and time faced by consumers and small businesses seeking to access credit, Federal Treasurer Josh Frydenberg said.

Westpac Banking Corp was the top gainer on the index, jumping as much as 7.3% to its highest since Sept. 8.

Also, Fitch Ratings said the A$1.3 billion ($917.15 million) fine agreed by Westpac to settle a lawsuit by financial crime agency AUSTRAC is manageable for the lender.

The remaining three of the "Big Four" banks gained between 3% and 5%.

Sentiment was also boosted by a fall in infections in Victoria, the country's COVID-19 hotspot, to a three-month low, improving hopes that restrictions will be eased sooner than expected.

Mining stocks climbed as much as 1.9%, on track for their best session since Sept. 14, lifted by a rise in iron ore prices.

Mining giants BHP Group and Rio Tinto each advanced more than 2%.

New Zealand's benchmark S&P/NZX 50 index rose 0.4% to 11,733.87. It has gained 0.9% so far on a weekly basis.

Top gainers were Westpac and Australia New Zealand Banking Group, rising over 7% and about 5%, respectively. ($1 = 1.4174 Australian dollars) (Reporting by Nikhil Subba in Bengaluru; Editing by Rashmi Aich)