Australia has an inefficient employment services system which has tied up providers in red tape and made job-seekers less employable.
A damning 650-page review of Workforce Australia was released on Thursday, and makes 75 recommendations to overhaul and rebuild the system.
It is the first assessment of employment services since they were privatised by the Howard government almost 25 years ago.
A parliamentary committee found the system was driven by the myth of the "dole bludger".
This was reflected in the "patently ridiculous" level of compliance and reporting activities.
"Employers have made it clear that the system adds little value to their business, and that it repeatedly tries to force unsuitable job seekers into vacancies without providing adequate incentives or support," the report reads.
A "Hunger Games-style" contracting model and regulatory culture had led to very high turnover in providers during contract and licensing rounds.
This led to service disruption and devastating impacts on relationships of trust which had been built up between job seekers and providers, and with employers.
"There is no other human services system where this level of provider turnover would be considered desirable or acceptable," the report reads.
As of September 2023, there were 624,655 people in Workforce Australia.
Committee chair and Labor MP Julian Hill was scathing in his assessment, declaring the system seriously flawed and one which sometimes got someone a job against all odds.
"The current system is inefficient, tying clients and providers up in red tape, driving away businesses and effectively making too many people less employable by requiring them to do silly courses, pointless activities or apply for jobs they simply cannot do," he said.
"It has failed to prepare people for today's red-hot labour market and to effectively address long-term unemployment, with 150,000 people stuck in the system for over five years. This must change."
Mr Hill said it shouldn't be controversial to say full privatisation has failed.
The report recommended a new entity known as Employment Services Australia, which would have regional hubs and engage with employers.
Employment services participants gave evidence to the inquiry that their provider had engaged in antagonistic or bullying behaviour, which included using financial penalties as threats and refusing to believe valid reasons for failing to engage with services.
Greens senator Janet Rice said there was no evidence mutual obligations work, and should be abolished.
"We need to respect people's autonomy," she said.
"The solution, if someone is disengaging from these services, is not to coerce them into it, but to engage with their life circumstances and what they genuinely need.
"Income support should be a fundamental right, granted to anyone that needs help."
In a joint statement, the Brotherhood of St. Laurence and the Centre for Policy Development said the current model of employment services didn't serve the interests of people, businesses, service providers or the country.
"This billion dollar service system is broken and in need of repair," they said.
