Treasurer Josh Frydenberg has jumped on a new report that has upgraded Australia's growth forecast while slashing the outlook for the global economy.
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But Labor says while this is welcome, Australians are being slugged by skyrocketing costs of living.
The International Monetary Fund has downgraded its global economic growth forecasts in response to Russia's invasion of Ukraine and the resulting supply chain disruptions and spike in inflation.
However, disruptions to Russian and Ukraine exports may be windfalls for other commodity exporters, like Australia.
"This crisis unfolds while the global economy was on a mending path but had not yet fully recovered from the COVID-19 pandemic," the IMF says in its latest world economic outlook.
"Beyond the immediate humanitarian impacts, the war will severely set back the global recovery, slowing growth and increasing inflation even further."
At the same time frequent and wider-ranging lockdowns in the world's second largest economy, China, has slowed economic activity there and could cause new bottlenecks in global supply chains, it says.
The IMF now expects world growth to be 3.6 per cent in 2022, rather than the 4.4 per cent it predicted in January.
For 2023, growth is also forecast to be 3.6 per cent, down from a previous estimate of 3.8 per cent.
"Inflation is expected to remain elevated for longer than in the previous forecast, driven by war-induced commodity price increases and broadening price pressures," the Washington-based institution says.
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For 2022, inflation is projected at 5.7 per cent in advanced economies and 8.7 per cent in emerging market and developing economies, compared with 3.9 per cent and 5.9 per cent respectively projected in January.
Prices of agricultural commodities are likely to rise further, particularly wheat, with Russia and Ukraine accounting for close to 30 per cent of global wheat exports, and to a lesser extent, corn.
"These changes will add to already soaring prices of staple foods and mean that disruptions to Russian exports may be windfalls for other commodity exporters."
Indeed, the IMF now expects Australian economic growth to be 4.2 per cent in 2022, up slightly from a previous forecast of 4.1 per cent.
Mr Frydenberg said the IMF recognises the underlying strength of the Australian economy outperforming all major advanced economies in the face of the pandemic, war in Europe and floods at home.
"Only the coalition has the economic plan to keep our economy strong, keep taxes low and see more Australians in work," he said in a statement.
Shadow treasurer Jim Chalmers welcomed the expected strong recovery.
"But Australians are being slugged by skyrocketing costs of living at the same time as their real wages are going backwards," Dr Chalmers told AAP.
The IMF expects Australian inflation to rise to 3.9 per cent in 2022, rather than the 2.1 per cent previously thought, well above the Reserve Bank of Australia's two to three per cent inflation target.
"Elevated inflation will complicate the trade-offs central banks face between containing price pressures and safe-guarding growth," the IMF said.
The RBA warned in the minutes of its April board meeting released on Tuesday that rising inflation has likely brought forward the timing of an increase in the cash rate, with economists generally expecting a move in June.
Australian Associated Press
