An armed 'sovereign citizen' has reportedly fled with his wife and kids after shooting dead two police officers and wounding another at a rural property in Porepunkah, 300km northeast of Melbourne.

Local authorities urged residents to avoid the area, about 200 miles from Melbourne, as they search for the gunman. A third officer was wounded.

Two Australian police officers have been gunned down in an “execution” by a suspected sex offender who then took his wife and children hostage and fled into the bush, police said.