Immigration Minister Alex Hawke says the move will help fill staffing gaps in these sectors and support Australia's economy recovery.
"Government has listened carefully to the states, territories and industry and is introducing these changes to support critical sectors for Australia's COVID-19 economic recovery," he said.
The decision comes after international students, including those working in these sectors, were among the worst impacted by COVID shutdowns at the height of the coronavirus pandemic last year.
A survey by Unions NSW last year found many were struggling to make ends meet and were forced to take cash-in-hand jobs to stay afloat.
Mr Hawke said the tourism and hospitality sectors employ more than half a million Australians and these changes will help businesses supplement their existing workforce, which he described as "generating employment through a job multiplier effect".
Hospitality and tourism will now also be classified as critical industries alongside other sectors such as agriculture, food processing, health care, disability care and childcare with similar allowances.
Temporary visa holders working in or intending to work in tourism and hospitality will also be able to apply for the 408 COVID-19 Visa up to 90 days before their existing visa expires.
This will enable them to remain in Australia for up to 12 additional months.
In a separate measure, Mr Hawke says he will include veterinarians in the Priority Skilled Occupation List for skills deemed critical for Australia's economic recovery.
The immigration minister has also flagged further changes to visa settings.
"I am continuing to take feedback and advice from a range of sectors and will make further announcements on temporary visa flexibility measures and priority skills in the near future," he said.
Earlier this year the Australian government announced a $1.2 billion package to assist tourism operators facing the withdrawal of the JobKeeper wage subsidy in March.
The package received a mix response with some operators flagging the need for more targeted support amid the challenges posed by border closures forced by the coronavirus pandemic.