Australia's Prime Minister Malcolm Turnbull addresses the United Nations General Assembly in the Manhattan borough of New York, US, September 21, 2016. [Photo/Agencies]

CANBERRA - The downfall of Islamic State (IS) in the Middle East is fast approaching, but the threat of urban terror from propaganda-fed "lone wolf" terrorists is only going to rise, Australian Prime Minister Malcolm Turnbull said on Friday.

In a statement released to his official government website overnight and reported by Australian media on Friday, Turnbull said the coalition military is making solid territorial gains against IS forces in the Middle East, and the eventual liberation of IS strongholds such as Mosul in Iraq and Raqqa in Syria was just a matter of time.

"The good news in terms of the battle against Daesh or IS is that we are continuing to roll them back and we look forward to further gains over the course of the next six months or so," Turnbull said on his website.

"There is a very real prospect of completing the defeat of (IS) in the battlefield, ending their so-called caliphate as there is real progress being made towards the recapture (and) liberation of Mosul and Raqqa. But these operations will take their own course, and I'm not going to flag dates or times."

"Remember their boast? They said they were going to sweep across Europe and stable their horses in the Vatican. Well that is not going to happen."

But Turnbull warned that although positive steps were being made on the battlefield in the Middle East, IS would only continue to encourage "lone wolf terrorists" -- those who act alone in causing destabilization in foreign countries.

The prime minister said the "propaganda" which IS promotes would continue to help radicalize impressionable, would-be terrorists, and encourage them to commit random acts of violence in Western societies such as Australia.

"Of course the struggle against terrorism will continue for many years to come," Turnbull said. "There is a concern that the terrorist, the lone actor terrorist threat in countries like the United States and Australia and the West, if you like, will get worse before it gets better."

"They are on the way out in terms of their caliphate, but their scourge of terrorism and the propaganda of terrorism and their extremism will, we are sure, continue."

"Defeating (IS) on the battlefield is critically important, but the battle to keep Australians safe and Americans safe from extremism, from Islamist extremism will continue until that battle of ideas is won within Islam."

Meanwhile Turnbull also said a "careful investigation" was underway to determine how and why coalition forces operating in the Middle East performed airstrikes which killed more than 90 Syrian government soldiers last week.

Australian jets were reported to be involved in the catastrophe, and when asked if it was a "terrible mistake" or the result of officers "swapping uniforms" for "a bit of mischief", Turnbull said: "There is a very careful investigation underway at the moment and that will tell us what happened."

"The events leading up to the strike is the subject of the investigation, but I want to be very, very clear; our rules of engagement are unambiguous, we are in the defence of Iraq, operating in Syria to destroy (IS) full stop."