Treasurer Josh Frydenberg agrees with the International Monetary Fund the global economic recovery is dependent on the successful rollout of the coronavirus vaccine.
The IMF has upgraded its global economic growth forecast for this year, but admits that exceptional uncertainty remains.
It now expects the world economy to grow by 5.5 per cent in 2021, up 0.3 per cent from its previous prediction in October.
The IMF has kept its growth forecast for 2022 at 4.2 per cent.
This follows a global contraction of 3.5 per cent in 2020 as a result of the coronavirus pandemic.
The upgrade reflects expectations of a coronavirus vaccine strengthening economic activity later this year, coupled with additional policy support in a few large economies.
"Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook," the IMF says.
"The strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spill overs and structural characteristics entering the crisis."
The IMF noted Australia was one of several economies to experience surprisingly strong economic growth in the September quarter.
However, in an update of its World Economic Outlook that was released in October, the IMF did not provide a new forecast for the Australian outlook.
In October, the organisation forecast the Australian economy to expand by three per cent in 2021.
"The fact that our economy is recovering and the jobs are coming back significantly ... is a function of us getting the virus under control," Mr Frydenberg told ABC radio on Wednesday.
"The vaccine and its rollout is going to be critical to maintaining that momentum."
The Washington-based institution says policy decisions by countries should ensure effective support until their economic recoveries are firmly under way.
Shadow treasurer Jim Chalmers said while parts of the Australian economy are recovering, the IMF's outlook highlights the substantial challenges of high and persistent unemployment and underemployment.
Dr Chalmers also noted the IMF warns of the "need to maintain support until a vaccine is broadly deployed".
"The Morrison government should not and cannot congratulate themselves while more than two million Australians are either without a job or don't have enough hours and wages are stagnant," Dr Chalmers said in a statement.
The IMF warns growth could turn out weaker than predicted if new variants of coronavirus emerge and prove difficult to contain, or if infections and deaths mount rapidly before vaccines are widely available.
"Slower than anticipated progress on medical interventions could dampen hopes of a relatively quick exit from the pandemic and weaken confidence," the IMF said.
However, favourable news on vaccine manufacturing, distribution and effectiveness could increase expectations of a faster end to the pandemic than assumed, boosting confidence.
"This would generate stronger consumption, investment and employment recoveries, with firms hiring and expanding capacity in anticipation of rising demand," the IMF said.
Australian Associated Press
