The report of the public service benchmarking body "brings reality" into pay settlement in the public service, business group Ibec said.
Ibec director general Turlough O'Sullivan said that unlike the report of five years ago, today's report acknowledges the State-backed pensions enjoyed by public sector employees.
"As public sector workers do not face competition, it is only fair that their pay be properly matched against those who do. As we seek to restore our competitive edge in the world and protect jobs and living standards for all, pay moderation is essential," Mr O'Sullivan said.
He pointed to the Central Statistics Office National Employment Survey for 2006, which found public sector workers enjoy average earnings of 49 per cent higher than the private sector.
"Research from the European Central Bank found that between 1999 and 2006, average public sector pay in Ireland increased by 67 per cent, while that in the euro area grew by just 22 per cent.
"In the private sector, average pay in Ireland increased by 42 per cent compared to just 15 per cent in the euro area.
"Irish public sector pay has grown faster than any other country in the EU with actual pay levels overtaking those in almost every other OECD country," Mr O'Sullivan added.