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Australia is wasting human talent on an "industrial scale" by failing to recognise the skills and qualifications of highly trained permanent migrants, experts say.

They say we also need to overhaul our occupational licensing system and skills recognition system, so that workers' qualifications are recognised in every state and territory in Australia without having to retrain.

Martin Parkinson, a former Treasury secretary, has warned that Australia is facing the very real risk of stagflation.

He says at a time of rising inflation and weak economic growth, it is "imperative" that Australia's governments pull all the levers they can to significantly boost productivity.

He says reforming our skills recognition system would help to fix chronic skills shortages in Australia's economy and boost the supply of labour, while helping to fix our worst labour productivity growth on record.

"A nurse qualified in Queensland should not face a different licensing process in Western Australia," Dr Parkinson said.

"An electrician licensed in Victoria should not have to start again in New South Wales.

"It may seem an odd analogy, but we've been here before — when we settled on a common rail gauge for cross-border railways. Rather than having to swap gauges and trains, we made it seamless to travel from one jurisdiction to another.

"Yet even today, 125 years after Federation, we still struggle with mutual recognition.

"We have built a system that prevents migrants, not just those who may come in the future but those who are already here, from working at their full capacity.

"No matter where you sit on the size of the migration program debate, you have to recognise that a more immediate question is whether Australia is getting the economic value it should from the skilled people it has already invited here, and those it will invite in the future," he said.

Dr Parkinson delivered his message at the National Press Club on Wednesday, alongside Violet Roumeliotis, the chief executive officer of Settlement Services International (SSI).

They took the opportunity to promote the Activate Australia's Skills campaign, which is an alliance of more than 100 businesses, unions and employers groups that want to reform Australia's skills recognition system.

Wasting human talent on 'industrial scale'

Ms Roumeliotis told the Press Club that Australia was paying the price for failing to use the "immense talent" already living in this country.

She said we have invited doctors, nurses, aged care workers, tradespeople, engineers and speech pathologists, among many other skilled professionals, to live in Australia as permanent migrants.  

But hundreds of thousands of them were not working in the jobs for which they are qualified because of slow, unfair and expensive processes to simply recognise their skills, she said.

"Right now, 44 per cent of qualified permanent migrants are working below their skill level," Ms Roumeliotis said.

"That is about 620,000 people not working in their trained professions, while we have critical shortages in those same fields.

"There are 47,000 migrant engineers in this country working below their skill level right now, at the same time, the national shortfall of engineers has reached a decade high.

"There are 20,000 under-utilised teachers, when eight in 10 public schools are grappling with teacher shortages.

"And there are 1,300 electricians not using their skills in the middle of the worst housing crisis in a generation," she said.

Ms Roumeliotis said two out of three under-utilised permanent migrants in Australia arrived through the skilled migration stream. 

She said those are people that Australia has actively selected and invited because we need their skills, but our systems are preventing them from putting those skills to use once they arrive.

"The culprit is a completely disconnected system," she told the Press Club. 

"You're forced to navigate a separate onshore process to recognise your skills and get licensed to practise. A process that totally ignores the assessments you've already done. It's just ridiculous and completely inefficient."

What Australia gets wrong in migration debate

In late 2022, the Albanese government asked Dr Parkinson to conduct a "wholesale review" of Australia's migration system, and the final report of that review was handed to the government in March 2023.

The review found Australia's migration system was "not fit for purpose."

On Wednesday, Dr Parkinson said the migration debate currently playing out in Canberra, and across Australia, was still not addressing the challenges we face as a nation. 

"Let me be clear — that is not a criticism of Australians who have concerns about the level or composition of our migration program. They are legitimate issues for us to discuss," he said.

"But to think that the total number of migrants is the key, indeed the only, issue surrounding migration policy is just plain wrong.

"No matter where you sit on the size of the migration program debate, you have to recognise that a more immediate question is whether Australia is getting the economic value it should from the skilled people it has already invited here, and those it will invite in the future. 

"Right now, the answer is clearly no," he said.

How to activate Australia's skills

Dr Parkinson said some of the recommendations in his migration review touched on the problems Australia has with its skills recognition systems.

The Activate Australia's Skills campaign highlights four key things to do to address that specific problem.

"The centrepiece is national governance," Parkinson said.

First, establish an independent skills and qualifications recognition commissioner: a statutory function with oversight of the end-to-end recognition system, from visa to occupational licence to employment.

It would identify system barriers and propose solutions while never reducing Australia's rightly high standards.

It would turn a patchwork of individual assessing bodies into a single system with shared objectives that works in the public interest to ensure an adequate supply of talent to address the nation's skill shortages.

Second, create a national recognition system navigation service to offer a single point of guidance for migrants working through the recognition process, across jurisdictions and across professions.

Third, provide financial support where it's needed. 

Dr Parkinson says people should not be stopped from contributing hundreds of thousands of dollars to the economy because of a recognition process that is prohibitive when they are starting. 

Fourth, ensure that the way Australia chooses skilled migrants in the first place is better informed by occupational licensing requirements, so that we stop creating the problem at the point of entry.

"When Australia invites someone here because of their skills, there is an implicit bargain: we will let you use [your skills] to your benefit but, more so, to ours," Dr Parkinson said.

"Right now, we are not keeping our end of that bargain.

"Not only is it not the fair go that we pride ourselves on, but we are wasting human capital on an industrial scale, in an economy that cannot afford to," he said.