Spare cash at the Australian government's disposal should be invested in infrastructure or reserved as a safety buffer for challenging times, the International Monetary Fund believes.
The IMF's directors have expressed the view in their latest report on the Australian economy, released on Friday.
"Most directors noted that Australia's substantial fiscal space could be utilised for further increases in high-quality infrastructure spending to boost potential growth," the assessment states.
"At the same time, a number of directors noted that the fiscal space could be preserved as a buffer to deal with shocks."
The advice comes as the IMF has commended Australian authorities for their "sound macroeconomic management and strong policy framework".
Such management has contributed to more than two decades of "robust and resilient economic performance", it said.
Although above-trend growth is forecast to continue in the near future, the IMF has also acknowledged the challenges the economy is facing.
"A weaker global economic environment, high household debt, and vulnerabilities in the housing sector could weigh on medium-term growth," it said.
It said that shows the need to maintain policies that encourage demand in the economy, deal with risks and boost long-term productivity.
Australia must also remain vigilant about the state of its housing market, the report states.
Directors have recommended "continued housing supply reforms" to ensure affordability and reduce threats to growth.
Treasurer Josh Frydenberg said the review is an endorsement of the coalition's economic stewardship, including its measures to create more jobs.
"The IMF endorses the government's fiscal strategy of returning the budget to surplus - Australia's first in over a decade," he said in a statement.
Federal Labor said the report backs its proposed changes to housing tax concessions such as negative gearing and capital gains tax.
"Labor is the only party willing to undertake real tax reform, while also ensuring we have bigger budget surpluses to build fiscal buffers while economic circumstances allow," shadow treasurer Chris Bowen said.
