Labuschagne was left out of Australia's provisional squad but struck rich form in South Africa and India to force his way into the 15-member squad.
Coach Andrew McDonald has said the batter has returned as a different player in the ODI setup but batting mainstay Smith said he never doubted Labuschagne's class.
"I wouldn't say he's a different player. I think we all know he's a class player. He's a very good cricketer, he's got a smart cricket brain on him," Smith told reporters on Friday.
"I think for him, obviously his last 12 months prior probably weren't his best in one-day cricket, and he's the first to admit that. Sometimes that happens."
Replacing Cameron Green as concussion sub, South Africa-born Labuschagne smashed 80 not out in Bloemfontein last month and followed it with 124.
The right-hander also looked in fine touch in the three-match ODI series in India scoring 39, 27, and 72 in his three outings.
"He's come back and he's taken his opportunities, got himself into the squad and now he's obviously likely to bat in the top four throughout the World Cup," Smith said.
"I think the way he's playing at the moment, he's now confident, he's got the feel for one-day cricket and the tempo and all those kinds of things.
"Once he gets there, he's a very good player. So, not surprised."
Australia will also take heart from all-rounder Mitchell Marsh's red-hot form as they begin their bid for a sixth 50-overs World Cup title against hosts India on Sunday.
Marsh is likely to be David Warner's opening partner at least until Travis Head recovers from a fractured hand.
Smith would not speculate on the look of Australia's top order once Head is back and said he was ready to bat anywhere.
"It would be interesting. Fingers crossed, Heady can still come up. He still got a fair way to go before he is potentially fit."
"Three is my favourite position but I'd bat wherever (asked to), I suppose."
