Treasurer Wayne Swan says central bank forecasts showing the economy is growing at a faster pace than expected are encouraging.
The Reserve Bank of Australia (RBA) on Friday upgraded its economic growth forecasts in its latest quarterly statement on monetary policy.
"The RBA has today confirmed our economy is currently travelling along better than expected, with growth upgrades that now have our economy growing at above trend pace this year," Mr Swan said in a statement.
The central bank expects annual gross domestic product (GDP) to have expanded by 3.75 per cent in 2011/12, up from the 2.75 per cent it predicted three months ago.
The official national accounts report for that period won't be released until September 5.
The RBA also expects GDP growth of 3.5 per cent in calendar 2012, up from three per cent.
The central bank said employment growth had been stronger than expected and low inflation outcomes were in part reflecting recent improvements in productivity.
"(It) provides yet more encouraging news about our strong economic fundamentals at time of ongoing global uncertainty," Mr Swan said.
The central bank made some minor adjustments to its inflation forecasts.
It now expects the consumer price index (CPI) to be 2.25 per cent by the end of the year, instead of 2.5 per cent, while underlying inflation is forecast at 2.5 per cent rather than 2.25 per cent.
The projections are all well within the RBA's two to three per cent target band and include the carbon price effect that Treasury has estimated will add 0.7 per cent to inflation in 2012/13.
Come June 2013, CPI is forecast in a 2.5 to 3.5 per cent range, and underlying inflation in a two to three per cent range.
"The carbon price effect on inflation will largely have passed by late 2013 and underlying inflation is forecast to be around the middle of the target range thereafter," the RBA said.