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Treasury secretary John Fraser has defended his budget forecast for economic growth, saying there are indications "the long period of growth undershooting forecasts is beginning to come to an end".
In the past three budgets the Treasury has forecast a lift in economic growth of 3 per cent and has been disappointed.
But Mr Fraser told a Senate estimates hearing on Monday there were indications that this time economic growth would climb to 3 per cent by 2018-19 after climbing to 2.75 per cent in 2017-18.
"The lift in growth is expected to occur as the drag from mining investment diminishes, growth in household consumption improves and exports continue to grow strongly,' he said.
"At the same time, non-mining investment will be supported by strengthening domestic demand, solid business conditions and lending rates for businesses at around their lowest level since the global financial crisis".
Mr Fraser conceded that low levels of investment had been an "ongoing challenge".
"All countries are seeing a reluctance for businesses to commit to investment and more emphasis on distributing profits to shareholders," he said.
"But the big change from a year ago has been a boost in global confidence. Confidence is a big factor. You don't have to be a be a fan of Mr Keynes [the economist Maynard Keynes] to know that.
"It's showing up in share markets. I don't normally put a lot of weight on share markets, but there is palpably more confidence. There's got to be a point when when we face capacity pressures and get investment coming back.
"We are already seeing some labour shortages in north west Sydney and some in Melbourne. They are straws in the wind at the moment, but if we just forecast a flat line, we might as well hand back in our economics degrees.
"Two years ago the International Monetary Fund, the Organisation for Economic Co-operation and Development were all forecasting no sign of a pick up. We've seen remarkable change in their attitudes.
"Any suggestion that we are looking at things through rose-coloured glasses is wrong."
Asked how he would describe the Treasury projection of a lift in wage growth from 1.9 per cent to 3 per cent and then to 3.75 per cent in 2020-21, he said, "it's a forecast, it's a best forecast".
Told that Treasurer Scott Morrison had described the wages forecast as "conservative", Mr Fraser said it was simply the department's best forecast.
