Australian special forces are within 50 kilometres of the frontline of the Islamic State stronghold of Mosul as the ground offensive shifts to liberating the city's west.
Australian soldiers are at forward operating bases advising and assisting Iraqi soldiers and providing medical treatment to the wounded.
Schools and markets have reopened and life is starting to return to normal for civilians in East Mosul.
But an estimated 750,000 civilians are under siege across the Tigris River which is home to the old city with narrower streets and denser terrain.
Australian Defence Force chief of joint operations Vice Admiral David Johnston warned there is likely to be IS (Daesh) sleeper cells among the civilian population in the city's east who will conduct terrorist attacks to delay the offensive in the west.
"The liberation of Mosul will not be the end of the mission to defeat Daesh but its successful conclusion will increase pressure on Daesh, both in Iraq, Syria and globally," Vice Admiral Johnston told reporters in Canberra.
Australian combat aircraft have struck 131 targets across the Mosul area since the advance began in October.
The targets hit include improvised explosive factories, Islamic State fighters, heavy weapon locations, tunnel entrances and weapon caches.
Australian and New Zealand soldiers have so far trained seven Iraqi brigades fighting to take back Mosul.
A total of 19,000 Iraqi soldiers have gone through training at the Taji base along with 1900 police.
The next phase of the mission after Mosul's fall will target IS fighters at Tal Afar, the Euphrates River valley near the Syrian border.
Australia has 780 defence personnel deployed to the Middle East as part of US-led coalition fighting IS extremists.
The Pentagon is devising a new war strategy for US President Donald Trump, expected to be released in the next fortnight.
Prime Minister Malcolm Turnbull insists US requests for a greater Australian contribution would be decided on merit.
Vice Admiral Johnston said if the government approved any "there would be options".
