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Skills and Workforce Development Agreement

Study report

This report was sent to Government on 15 December 2020 and publicly released on 21 January 2021.

The report sets out the Commission's Review of the National Agreement for Skills and Workforce Development (NASWD). Its key messages are that the NAWSD should be replaced with a new principles based agreement, and there is manifest capacity for governments to get a better return from their investment in vocational education and training (VET).

Download the overview

Download the report


Following release of the final report, the Commission received information that has led it to revise some statements in the report. These changes were incorporated into the online and print-on-demand versions of the report on 18 February 2021.

  • Key points
  • Media release
  • Contents
  • This review has not found evidence of a vocational education and training (VET) system in crisis. Our recommendations address some of the system’s acknowledged weaknesses and should build on its strengths to lift participation and improve the quality of training.
  • The National Agreement for Skills and Workforce Development is overdue for replacement.
    • Governments have stepped back from some of its policy aspirations. Targets have not been met and the performance framework has not held governments to account.
  • A new intergovernmental agreement should be principles‑based, modular (to retain flexibility and currency) and reviewed every five years.
    • Australian Government funding should remain largely untied for base funding but subject to much greater accountability and transparency.
  • Governments should continue to support the development of a more efficient and competitive VET market through informed user choice and a focus on quality.
    • Students need better curated information on career opportunities, the performance of training providers, course quality and prices.
    • Efforts to improve quality should be ramped up through faster changes to training packages, developing an evidence‑based VET workforce strategy, and a phased introduction of independent assessment.
  • There is a manifest capacity for governments to achieve a better return on the $6.4billion spent on VET by:
    • using the efficient costs and loadings currently being estimated by the National Skills Commission as a common basis for setting and simplifying course subsidies
    • introducing modest minimum student fees for Certificate III and above courses with exemptions for disadvantaged students
    • applying more contestability and transparency to public funding of TAFEs and enhancing the operational autonomy of public providers
    • enabling State and Territory funding to follow students enrolled with an interstate provider.
  • To scale up workforce skills, governments should expand VET Student Loans (VSL) to more Diploma and above courses and to most Certificate IV courses.
    • Loan caps should better reflect course costs, and loan fees should be paid by all students.
  • Reforms to the trade apprenticeship system are best focused on:
    • improving completion rates by better screening and matching of prospective apprentices
    • making pathways more flexible and providing the same subsidy for non‑apprenticeship pathways as for traditional pathways
    • adjusting the timing of employer incentives to provide more support when the risk of cancellation is greatest.
  • There should be a coordinated national strategy to improve school education, ‘second-chance’ learning in the VET sector and other adult education services to reduce the large number of Australians with low language, literacy, numeracy and digital literacy skills.
  • To address some of the key obstacles to lifelong learning, this report proposes improvements in foundation skills, better credit pathways, an expansion of VSL and a trial of a new financing instrument for mature‑age Australians reskilling and upskilling.

National Agreement for Skills and Workforce Development overdue for replacement

A new round of reform for the Vocational Education and Training (VET) system is needed to deliver a more productive workforce for Australia says the Productivity Commission.

The Productivity Commission today released its review of the National Agreement for Skills and Workforce Development (NASWD).

“Governments have stepped back from some of the NASWD’s policy aspirations. Targets have not been met and the performance framework has not held governments to account,” Commissioner Jonathan Coppel said.

“The guiding principle for the review is to strengthen the focus of the VET system on meeting the needs of its users — students and employers,” Commissioner Coppel added.

The Commission recommends changes to make the next intergovernmental agreement more effective and improve accountability for the $6.4 billion spent each year by governments.

“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,” he added.

Income contingent loans make it possible for students to take university and higher VET courses. More courses, including Certificate IV courses, should be eligible for loans, with the emphasis on courses which deliver genuine results for students.

Too many VET students do not complete their courses. Governments can support students — especially apprentices — to complete their training through better matching of students and courses, more support during training and timely employer incentives.

VET helps many people who lack essential language, literacy, numeracy and digital skills. Two to three million Australians have one or more of these skills below the level usually achieved by Year 8. A broad strategy involving schools, VET and adult education providers is needed to tackle this significant problem.

Lifelong learning helps people upgrade their skills over their careers. Mid-career employees often do not need the formal qualifications funded by governments; they want short-term, focused training. The Commission recommends a trial to test whether a new financing instrument is needed to support people obtain training tailored to their needs.

The Commission’s final review of the National Agreement for Skills and Workforce Development can be found at .


  • Cover, Copyright and publication detail, Foreword, Terms of reference, Contents and Abbreviations


  • Key points
  • About this review
  • A snapshot of the VET system
  • The NASWD: lessons and a way forward
  • Supporting the VET system
  • Funding and pricing
  • Income contingent loans
  • Apprenticeships
  • Foundation skills and other targeted reforms
  • Supporting lifelong learning
  • Summing-up

Findings and recommendations

  • The VET system
  • The NASWD and a new agreement
  • Supporting VET through informed choice and quality
  • Expanding participation in VET

Part A — The review

  • Chapter 1 About this review
    • 1.1 The historical background
    • 1.2 The review’s scope
    • 1.3 The changing context for this review
    • 1.4 The Commission’s approach

Part B — The VET system

  • Chapter 2 The VET system
    • 2.1 What does the VET system offer?
    • 2.2 Who uses the VET system?
    • 2.3 Who provides VET?
    • 2.4 How is VET funded?
    • 2.5 How VET markets function
    • 2.6 What are the outcomes of VET?
    • 2.7 Effects of COVID 19 on the VET system
  • Chapter 3 The role of government in VET
    • 3.1 Rationales for a government role in VET
    • 3.2 Governments’ role in managing VET markets
    • 3.3 Multiple roles of governments in public provision

Part C — The NASWD

  • Chapter 4 Performance of the NASWD
    • 4.1 Purpose of the NASWD
    • 4.2 The NASWD objective
    • 4.3 The performance framework
    • 4.4 The reform directions
    • 4.5 Governments’ roles and responsibilities
    • 4.6 Ongoing suitability of the NASWD
  • Chapter 5 Future intergovernmental arrangements
    • 5.1 A future intergovernmental agreement
    • 5.2 Intergovernmental funding arrangements
    • 5.3 Improved data, monitoring and evaluation

Part D — Supporting the VET system

  • Chapter 6 Informed choice in VET
    • 6.1 Informed choice
    • 6.2 Prospective students’ information needs
    • 6.3 Closing VET information gaps
    • 6.4 Addressing deficiencies in career guidance
  • Chapter 7 Ensuring quality training
    • 7.1 The student experience
    • 7.2 Course content
    • 7.3 Course delivery

Part E — Investment and participation in VET

  • Chapter 8 VET funding: the mechanics
    • 8.1 The approach to subsidising VET courses
    • 8.2 Determining which courses to subsidise
    • 8.3 How VET course subsidies are set
    • 8.4 How jurisdictions manage VET course subsidies
    • 8.5 Summing up
  • Chapter 9 VET funding: policy issues
    • 9.1 How should ‘national consistency’ be applied to VET funding and pricing?
    • 9.2 A common method for measuring efficient costs
    • 9.3 The design of course subsidies
    • 9.4 Price and student fee controls
    • 9.5 A greater role for contestable funding
  • Chapter 10 Lifting participation: the role of income contingent loans
    • 10.1 Income contingent loans can be highly effective
    • 10.2 Revising course restrictions for VET Student Loans
    • 10.3 Extending VET Student Loans to lower level qualifications
    • 10.4 Course prices and loan caps
    • 10.5 Loan fees and repayment terms
  • Chapter 11 Apprenticeships
    • 11.1 How is the apprenticeship system performing?
    • 11.2 Reducing barriers to apprenticeships
    • 11.3 The supply of apprentices
    • 11.4 Employer demand for apprentices
  • Chapter 12 LLND skills and other targeted reforms
    • 12.1 The Commission’s approach
    • 12.2 Language, literacy, numeracy and digital literacy skills
    • 12.3 VET in Schools
    • 12.4 Options for other targeted reforms
  • Chapter 13 Supporting lifelong learning
    • 13.1 There are gaps in adult learning
    • 13.2 An option to address gaps in lifelong learning
    • 13.3 Credit pathways


  • Appendix A Consultation
  • Appendix B Progress against the NASWD performance framework
  • Appendix C Funding and pricing arrangements for subsidised courses
  • Appendix D Income contingent loans: supporting information
  • Appendix E Apprenticeship pay effects
  • References

Printed copies

Printed copies of this report can be purchased from Canprint Communications.

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