Labuschagne is all-but certain of place in the Ashes squad after starting the domestic season with four centuries in five innings, including two in first-class matches.
Although his inclusion still needs to confirmed by the selectors, Smith revealed Labuschagne told him before the season that he would be back in the Test side.
"I sent him a message a couple of days ago saying how proud I was of him," Smith said. "He's just gone back and he's got his fourth hundred in five hits.
"It's a pretty big statement. He said to me at the start of the summer, he goes, 'I'll be in that Test team come the first [Ashes] Test'. He's backed up his words, probably.
"He's obviously not selected yet, (but) he's done a lot of things right."
Labuschagne has previously spoken about getting "too deep" into his technique and "trying to be too perfect" as looked to get his way back into the Australia team after being dropped.
"We've all been there [dropped] at some point in our careers and it's difficult to hear it," Smith said. "But I think he knew he probably wasn't batting as well as he had been over probably four years ago when he was scoring a mountain of runs.
"I think my advice to him was 'stop thinking so technically, just go and play the game; watch the ball and react'.
"I think he's been doing that really beautifully and he's played so nicely."
Australia head coach Andrew McDonald has confirmed that captain Pat Cummins has been ruled out of the first Ashes Test against England as the fast bowler has "run out of time" to prove his fitness.
The Proteas Women's run of five consecutive victories at the ICC Women's World Cup came to end after falling to a seven-wicket defeat against Australia on Saturday.
Australia batter Travis Head is hoping seamer-friendly pitches in the Ashes because he says it will help his stroke play.
Australia defeated India by two wickets in the second ODI of the series at the Adelaide Oval after a nervy finish that very nearly saw the visitors pull off an unlikely victory.
