Trade wars hurt both sides: RBA governor

Reserve Bank Governor Philip Lowe is hoping the United States and China will eventually learn it is in neither of their interests to be locked in a trade war.

"The lesson from history is incredibly clear," Dr Lowe has told a parliamentary committee in Canberra on Friday.

"No country has made itself wealthy and prosperous through protectionism. Building walls actually makes you worse off, we know that in the end.

"I'm hopeful that at some point that that lesson from history will be sufficiently internalised, and that influences the outcomes. Maybe I'm inappropriately optimistic, but I wouldn't give up hope yet."

The governor said Australia has a lot riding on the dispute between the two nations being resolved soon, as they continue to pose a "significant risk" to the global economy.

If the tensions don't fade, hesitance to invest is likely to hang around for a long time, undermining economic growth.

"If people don't want to invest, growth around the world will be lower and that will affect us here in Australia, including through wage growth and asset prices, so it's a very significant issue."

In that situation, Dr Lowe stressed it will be all the more important for Australia to ensures its economy remains flexible, and to ramp up productivity growth.

"We can do things domestically that make a difference," he said.