Australia is on the final leg of its economic recovery since the end of the mining boom, according to the International Monetary Fund's (IMF) latest report.

Key points: IMF says housing prices are falling at an "orderly" rate and improving affordability

IMF says housing prices are falling at an "orderly" rate and improving affordability US-China trade war could worsen the property downturn

US-China trade war could worsen the property downturn RBA is not expected to lift interest rates until wages lift further

The IMF also expects the federal budget to return to balance by the 2019/20 financial year, with surpluses to follow.

Another positive was the nation's "cooling" housing market, with prices falling at an "orderly" rate and "improving housing affordability".

Those were some of the IMF's key preliminary findings, following its two-week "mission" to Australia, during which it consulted businesses, academics, officials and regulators.

The nation's anaemic level of wages growth is expected to gradually rise, along with inflation (or the cost of living) — which has been growing at a slower than expected annual pace of 1.9 per cent, partially due to the weak retail environment.

Until then, the Reserve Bank's "appropriately accommodative" policy of keeping interest rates at record lows (1.5 per cent) "should remain".

"Notwithstanding recent strong growth, it is not yet the time to withdraw macroeconomic policy support given remaining slack," the IMF wrote in its report.

Essentially, it is suggesting that a rate hike is some time away for the RBA.

Trade war and housing risks

Despite the uptick in business investment and private consumption — which has been boosting Australia's GDP — the IMF warned of some risks that could derail the nation's "recent strong growth and declining unemployment".

Chief among them is the US-China trade war and slowing Chinese economy, which could "amplify the [housing] correction" and "lower domestic demand", the IMF said.

"The balance of risks to economic growth is tilted to the downside with a less favourable global risk picture.

"A weaker than expected near-term outlook in China coupled with further rising global protectionism and trade tensions could delay full closure of the output gap, although there are also upside risks to the terms of trade in the near term."

Last month, the IMF warned that the world remains vulnerable to another financial meltdown due to the prolonged period of "ultra low" interest rates — following the global financial crisis — which led to a surge in public debt in many countries.

Other risks include Australia's household debt levels, which are near record highs, and the major banks' "concentrated exposure" to mortgage lending.

In the past decade, property prices have risen by 70 per cent nationally, and by 90 to 100 per cent in Melbourne and Sydney, the IMF noted.

"A sharp tightening of global financial conditions could spill over into domestic financial markets," it noted.

The IMF said this could result in higher funding costs and reduce the disposable income for people who owe debts, "depending on the response of the Australian dollar".

Treasurer Josh Frydenberg welcomed the positive findings of the IMF report, and saw it as an endorsement of his Government's budget management.