The International Monetary Fund believes there are "significant risks and uncertainties" in the Australian economy.
The global body, in its latest consultation report on Australia, welcomed the government's plan to balance the budget over four years and focus its policies on economic growth.
"While the balance of risks to the growth outlook has improved, there remain significant risks and uncertainties, notably weaker-than-expected domestic consumption, housing-related vulnerabilities, the rise in protectionist policies in the global economy, and a significant slowdown in Australia's main trading partners," the IMF executive board said.
In a consultation paper, the IMF said the balance of risks to the growth outlook has improved, but significant risks and uncertainties still remain.
For 2017, the IMF expects real GDP growth to come in at 2.6 per cent, edging slightly higher to 3 per cent in 2018 and 2019, before dipping back to 2.9 per cent in 2020 and the subsequent years after.
"With inflation below target, still elevated underemployment, and remaining economic slack, the monetary policy stance should remain accommodative," the paper concluded.
While the cash rate remains at an historic low of 1.5 per cent, some analysts anticipate the central bank will hike rates in the second half of this year.
Meanwhile, the IMF forecast the unemployment rate to gradually fall over the next five years, from 5.7 per cent in 2017 to 5.1 per cent in 2022.
The IMF noted that support is needed for a transition to non-mining growth, and also warned that a rise in protectionist policies in the global economy could pose a risk for the country.
