The Australian government will factor into its expectation for growth China's sudden about-turn from strict COVID restrictions.
Treasurer Jim Chalmers said China remained a "big part of the story" when it comes to forecasting economic growth.
He said Treasury would factor in China's expected post-pandemic recovery and broader global conditions when it updated its forecasts ahead of the May budget.
"Most of the commentary from the IMF and the World Bank, if anything, has gotten more pessimistic rather than more optimistic, and so that will be factored in as well," he told reporters in Canberra on Monday.
Economists expect the massive COVID wave in China to cause short-term disruptions to supply chains but that the country will likely be in a position to rebound sharply once the wave passes, which will flow through to Australia in stronger demand for exports and stimulus from Chinese travellers.
Treasury's up-to-date predictions see a 3.25 per cent lift in economic growth this financial year before falling sharply to 1.5 per cent in 2023/24.
There are also signs of easing inflationary pressures, including in the construction industry.
Quarterly growth has been slowing as measured by CoreLogic's Cordell construction cost index, dipping to 1.9 per cent in the December quarter from 4.7 per cent in the three months to September.
Labour shortages and volatile material and energy prices fuelled a massive 12-month spike in construction costs but upwards pressure on these key inputs is anticipated to cool.
CoreLogic research director Tim Lawless said rising interest rates were already cooling demand for housing, with approvals for new building projects down 41 per cent compared to March 2021.
"A reduction in growth associated with the cost of building a new home should gradually flow through to less inflationary pressures from the housing sector through the year," he said.
He also said the normalisation of migration patterns should ease labour shortages.
Despite the expected return of migrants, most employers are still worried about finding staff in 2023.
An Australian Industry Group survey of chief executive officers found 90 per cent of CEOs expected to experience staff shortages in 2023
"These are most keenly felt in higher-skilled occupations, but are evident across all skill levels, industries and geographic locations," Ai Group chief executive Innes Willox said.
New Treasury analysis of Australian Bureau of Statistics data revealed the strength of Australia's jobs market, with 234,000 more people finding jobs between May and November 2022.
Construction, retail, and accommodation and food services led Australia's surge in employment.