The treasurer says China's COVID-19 outbreak is one of the biggest threats facing Australia's economy in 2023.
The government has been defending its decision to enforce negative COVID-19 tests on Chinese arrivals as a precaution against possible new virus variants that may develop as it spreads through China's population.
The wave of infections erupted after Beijing announced it was scrapping strict "zero-COVID" measures in favour of a new policy of living with the virus last month.
Australia's new travel restrictions have been enforced despite the chief health officer advising against pre-flight infection testing and calling for less disruptive measures, such as testing plane wastewater.
Treasurer Jim Chalmers said the government was protecting travellers as well as the economy by erring on the side of caution.
"(China's COVID situation) also has implications for the economy more broadly - the Chinese economy, the global economy, and therefore the Australian economy," he told ABC radio.
"So for all of these reasons, we've put these arrangements in place."
Australia's economic growth is expected to slow this year as high inflation and rising interest rates take a toll, but few predict a recession.
Dr Chalmers said while the government was trying to make Australia's supply chains more resilient, it couldn't just flick a switch.
Aside from China, the treasurer said he was also watching the war in Ukraine and how that will influence what happens in the US, UK and Europe this year, which in turn will affect what happens with global interest rates.
In Australia, the government remains alert to the fact that many low interest rate fixed-term mortgages will end this year and roll over to higher variable interest rate mortgages.
"That will put a lot of pressure on people," Dr Chalmers said.
Harvard University economics professor Ken Rogoff said economic conditions could be worse than expected in 2023.
"It could go in either direction, but chances are, it's going to be worst," he told ABC News radio.
He said China was a "wildcard" that could pull economies down two different paths, with the uncontrolled spread of COVID undoubtedly concerning.
But on the flip side, he said Chinese consumers could soon be back spending and travelling after years of restrictions, once the outbreaks die down.
However, a rapid burst in Chinese consumption could fuel inflation and put more pressure on central banks, Professor Rogoff warned.
Deteriorating economic conditions and higher interest rates are already slowing demand for Australia's manufactured goods.
The Judo Bank manufacturing purchasing manager's index returned another expansionary reading of 50.2 despite declines in output and new orders.
But Judo Bank chief economic advisor Warren Hogan said Australia's manufacturing industry was holding up better than the US, Europe and Japan.
"The latest PMI survey results are consistent with the Reserve Bank of Australia's policy changes in 2022 effectively rebalancing the economy without causing a sudden downturn in activity," Mr Hogan said.
