Australia's economic prosperity relies on people being able to trust banks and financial institutions, the head of the central bank has declared.

People must also be able to trust their living standards will get better over time, Reserve Bank of Australia Governor Philip Lowe has stressed in an address in Sydney.

"Our economy, and our society, works best when there are high levels of trust," Lowe told the Committee for Economic Development of Australia dinner.

"And those in whom trust has been placed need to do their best to be worthy of that trust."

Australian banks have a strong record of being worthy of the trust placed in them to repay deposits, Lowe said.

But he said the poor behaviour highlighted by the banking royal commission has dented trust in other parts of the sector.

Turning thing around will require banks to better deal with conflict of interest issues, do away with poorly-designed incentive systems and better hold misconduct to account, he said.

Lowe said a strong culture of service was also needed within financial institutions, stemming from systems set by boards and managers.

"Changes that are now taking place within the financial sector should, over time, help restore trust, although it is likely to be a gradual process," he said.

Aside from Australians being able to trust in their banks, the RBA boss has highlighted the importance of people being able to trust that their living standards will improve over time.