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The changing labour market in the new services economy relies heavily on publicly funded education and training to provide a workforce with the skills required for international competitiveness and economic growth. Education and training institutions play the critical role of producing sufficient numbers of graduates with high level qualifications to meet industry demand. A further goal of education and training policy is to provide pathways to attainment for people with low level skills who are at risk of marginalization in the changing labour market. The potential of education and training providers to meet the needs of people with low levels of formal education is hampered by the traditional structures, policies and practices that govern Australia's education and training system. The division of education and training into four sectors and the different funding arrangements for each sector pose a major obstacle to reform.