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This Senate Committee report is based on the premise that employers, unions and educators agree that Australia is facing some serious skills shortfalls which are set to worsen over the next decade without appropriate action. The first chapter gives the background to the report, the terms of reference of the enquiry and an overview of the issues. Chapter two looks at skills shortfalls and future skill needs, concluding that there is a necessity for the development of a more integrated approach to collection and dissemination of information on current and future skill needs. Chapter three looks at whether current policy is promoting the development of both high level and intermediate level skills, the nexus between the labour market and skill formation and the Job Network. The chapter concludes that the present approach to skill formation is not well suited to labour market conditions. Chapter four focuses on the current vocational education and training (VET) policy settings, funding arrangements and institutional framework for meeting Australia's current funding levels and future skill needs. Of concern is that the current funding models and reporting and accountability functions of the VET system are not compatible with the objectives of development of a high skill workforce, promotion of innovation and the development of a quality, responsive system that can provide diverse responses to skill needs. Chapter five suggests that multiple training pathways are important to cater for diversity in both the individual and the work environment and examines some of the current arrangements for providing individuals and industries with seamless pathways for skill formation. The final chapter has two main themes: (1) the role of industry in identifying and responding to the skill needs of its workforce; and (2) the need for a policy framework that promotes greater industry responsibility for training its workforce, touching briefly on the need for consultative arrangements within the training system to include the full range of stakeholders.