Governments have missed targets and stepped back from policy aspirations across Australia's vocational education and training system, the Productivity Commission has found.
In its review of the National Agreement for Skills and Workforce Development, the Productivity Commission made recommendations on how the system could better meet the needs of students and employers and improve accountability for the $6.4 billion of annual government spending in the VET system.
"There are reforms which should improve the returns from the large public investment in VET," Commissioner Malcolm Roberts said.
"Almost half of government funding is distributed as subsidies to training providers. These subsidies should be based on the efficient costs of delivering courses. Having hundreds of different subsidy rates is confusing and ineffective; subsidy rates should be simplified."
The final report released on Thursday showed some targets from the previous agreement between the state, territory and Commonwealth governments have not been met.
The proportion of employers who were satisfied the training met their needs declined from 86 per cent in 2009 to 79 per cent in 2019.
The proportion of Australians aged 20-64 without at least a Certificate III reduced from 47 per cent to 38 per cent over 10 years, but this missed the national target to halve that figure.
The VET system offers more than 1400 qualifications across almost 4000 registered training organisations, but the review found students and employers needed better access to information and career advice to make informed choices.
The report recommends expanding VET Student Loans to more Diploma and above courses and to most Certificate IV courses with an emphasis on courses which deliver genuine results for students. Currently the income-contingent loans are only available for 43 per cent of courses at Diploma or above level and no courses below Certificate IV are eligible for VET Student Loans.
It recommends governments use a common method for determining course subsidies based on work being done by the National Skills Commission and that they should be more transparent about funding of TAFEs.
The report identified a persistent skills shortage in many jobs that rely on apprenticeships, coupled with a drop in commencements and low completion rates. It said poor completion rates could be improved through better screening and matching prospective apprentices, more support during training and timely employer incentives.
The report said a broad strategy involving schools, VET and adult education providers was needed to help the two to three million Australians who lacked essential language, literacy, numeracy and digital skills.