A stark warning about the threat posed to the Australian economy by the housing and banking sectors has prompted a tit-for-tat war of words between the government and Labor Party over tax policy.

As the ASX200 shed $39 billion in value on growing concerns about global trade tensions and the strength of the Chinese economy, the major parties sparred over the key findings of the OECD's examination of Australia's parlous housing sector.

Treasurer Josh Frydenberg led the business growth fund meeting on Thursday. Credit:Alex Ellinghausen

The Paris-based think tank said Australian authorities should start preparing for a house price fall-induced blow to the economy that could put at risk some of the nation's major banks.

House values in Sydney have dropped by 9.6 per cent since their most recent peak, while in Melbourne they have slipped by 5.8 per cent. Some private sector analysts have predicted falls of up to 20 per cent.