States and territories will need to improve student wellbeing, equity and the quality of teaching to boost educational outcomes and reflect high levels of funding.
The Productivity Commission has released its interim report on the national school reform agreement signed by federal, state and territory governments in 2018 following a $319 billion funding deal over 11 years.
The agreement proposed eight national policy initiatives to lift education standards across Australia.
But the report found progress on some of the initiatives that would make the most difference has been disappointing.
Despite governments agreeing to address needs of Indigenous students, those with a disability and from regional, rural and remote areas, there have yet to be any results to demonstrate equity improvements.
Every year between five and nine per cent of Australian students do not meet year-level expectations in either literacy or numeracy.
Commissioner Natalie Siegel-Brown said while the national agreement was a promising start, more action was needed to deliver on the initiatives.
"We must do more to prevent students from falling behind and help those who are struggling to catch up with their peers," she said.
"Unfortunately, we persistently fall short of the ideal of an equitable education for all students ... low educational performance needs a different approach."
The commission recommends all states and territories find ways to assist students struggling to meet minimum standards.
Improving student wellbeing, equity and the quality of teaching should be the main focus of the new agreement when current arrangements finish late next year.
But Southern Cross University education professor Pasi Sahlberg said the review ignores the role inadequate funding plays in poor educational outcomes.
"Australia must stop wasting resources ... by maintaining education systems where most (public) schools are underfunded and many private schools receive taxpayer money that they don't need," he said.
Prof Sahlberg called for equity in education to be clearly defined so that measures can be monitored to assess their success.
The Australian Education Union, representing public school teachers, said the commission's report shows school funding equity remains a challenge.
"Currently, every public school student in Australia is missing out on an average $1800 in funding every year," deputy federal president Meredith Pearce said.
While the union agreed the focus for the next agreement should be on education workforce shortages, high teacher workloads and student wellbeing, funding levels cannot be ignored.
"It is no surprise that Australian students are struggling and that there are problems delivering an equitable education system when inequity was deliberately baked into the arrangements," Ms Pearce said.
The commission recommended the new agreement address policy challenges arising from education workforce shortages, lack of career pathways for mid-ranking teachers and principals, and high workloads.
"We have an opportunity with the next agreement to drive real improvements on the ground," Ms Siegel-Brown said.
"Getting our education system up to an A-grade will require a long-term, coordinated approach while allowing for local solutions."
The commission is seeking input to inform its final report. Submissions close on October 21.
