Beijing last month announced it was scrapping strict "zero-COVID" measures in favour of a new policy of living with the virus.
However, a wave of infections has since erupted across China after borders had been kept all but shut for three years amid a strict regime of lockdowns and relentless testing.
Experts in China are predicting three winter waves of COVID transmission with the current event expected to run until mid-January, followed by two waves in late January and late February to early March, Australia's Chief Medical Officer Paul Kelly has said.
"The Chinese situation is something that we're monitoring really closely because with a wave of this size, and everything that it means for the Chinese workforce ... that obviously brings a substantial amount of risk to those supply chains," Dr Chalmers told Sydney radio 2GB on Tuesday.
"And that has implications and consequences for us here."
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 he said on the flip side, 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 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 re-balancing the economy without causing a sudden downturn in activity," Mr Hogan said.
13°C