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The Australian vocational education and training (VET) system faces challenges in maintaining its capacity to meet the education and training needs of Australians in the 21st century. On the demand side of training, globalisation, technological change, and workplace change have had a significant impact on the way work is done and the type of skills needed. In terms of supply, Australia's workforce is ageing. This paper examines reforms to the Australian VET system aimed at developing a flexible training system that provides opportunities for re-skilling and lifelong learning. The paper begins with an overview of the Australian education and training system and then examines the major reforms implemented over the last decade. These include the introduction of a competency-based approach to training, the development of the training market and the introduction of an assessment and recognition system for learning and training outcomes. The paper also examines financing mechanisms for VET and the use of information and communication technology in VET. The paper concludes by listing the remaining challenges.