Green tallied 171 runs in five tests at an average of 24.42 and took four wickets as Australia triumphed 4-1 against England earlier this year.
Green, who made his test debut in 2020, has played 37 matches with a batting average of 32.75, including two centuries, and a bowling average of 38.94.
McDonald said Green’s domestic record justified his continued selection with a first-class batting average of 45.52, which rises to 53.38 in the Sheffield Shield.
"I think he's good enough," McDonald told SEN radio.
"Anyone that's averaging that at Shield level suggests that he's ahead of the pack there, and it's only a matter of time before it gets to a situation where he's performing for Australia.
"I think he's got a few things to work on around his game, but that's no different to anyone else."
Green, 26, has also been in focus during his stint with Indian Premier League side Kolkata Knight Riders, with Cricket Australia managing his workload due to a lower back injury that has temporarily restricted his bowling.
"Cameron is currently rebuilding his bowling loads in India with a view to return in around 10-12 days' time. KKR has been communicated with and is fully aware of this information," a CA spokesperson said on Monday.
McDonald said Green must learn to manage the expectations that come with being an Australian all-rounder, especially if he continued to play across formats.
"There's huge expectation within the IPL, and there's huge expectation with any all-rounder that shapes an Australian team," he said.
"I'm sure that his career will trend upwards. He's just got to balance out all those expectations, and in particular, playing all three formats, which is a significant challenge for any cricketer, let alone a player that's still learning."
Australia begin their test season in August with a two-match series against Bangladesh before touring South Africa in September for three one-day internationals and three tests.