Australians are likely to wait more than three years for a decent pay rise, the Reserve Bank has warned while challenging state and federal governments to end their caps on public sector wages and engage in sweeping tax reform.

Unveiling fresh economic forecasts that are substantially at odds with those underpinning the federal budget, RBA governor Philip Lowe used an at-times challenging appearance before the House of Representatives' economics committee to complain that limits on public sector pay rises were in effect "cementing" in place poor wage outcomes for the entire nation.

RBA governor Philip Lowe has called on state and federal governments to give their workers a pay rise while revealing wages are unlikely to rise substantially for several more years. Credit:Alex Ellinghausen

Markets expect the RBA will continue to slice official interest rates to 0.5 per cent by early next year, in part to drive down the unemployment rate and push up wages.

Dr Lowe said a major impediment to higher wages was the action of governments which, over a number of years, had sought to cap pay rises for the public sector, which accounts for up to a third of the nation's workforce.