The Australian economy will be $72 billion worse off if it does not dramatically increase the number of students completing high school, a new report has found.

The research, commissioned by the Australian Education Union and completed by former World Bank economist Adam Rorris, comes just a week before the federal budget.

It warns that future expenditure will blow out by at least $60 billion in unemployment benefits and incur a $12.2 billion loss in tax revenue by 2070 if current trends are not reversed.

The report, titled Australian Schooling: The Price of Failure and Reward for Success, found that the literacy and numeracy attainment of Australia's children is declining while the gap between the richest and the poorest students continues to widen.

According to NAPLAN data from 2009-2015, children of the unemployed are now 10 times more likely to not to meet minimum standards for literacy and numeracy as those children of senior professionals.

At the same time, up to 25 per cent of Indigenous children no longer meet the national minimum standard for reading three years before they are due to finish high school.

"There is nothing normal or inevitable about the degree of inequity in Australian learning outcomes," Mr Rorris said.

Only 10 out of 65 countries in the OECD's international assessment program have greater inequity in the allocation of resources than Australia, including Colombia, Costa Rica and Peru.

On Tuesday, new data from the Australian Bureau of Statistics showed Australian government's had spent $3.5 billion less on education as a proportion of operating expenses since 2009.

Education funding is a key battleground ahead of the expected federal election on July 2. While Labor committed to funding the popular Gonski policy in January, the federal government has refused to commit to the final two years of needs-based funding, despite pleadings from state government coalition ministers and the potential threat to marginal seats.

The Parliamentary Budget Office estimates the final two years of the program would deliver up to $4.5 billion for the nations schools.

Rooty Hill High School principal Christine Cawsey said that Gonski funding had helped address entrenched inequality at her school in Sydney's west, by allowing the school to tailor lesson plans to individual students and hire three support staff for teacher development.

"I think the Australian community knows that we can't lose another generation of our children," she said. "As the Californians say, 'spend money on education or build more jails."

The report found that if all Australian children were to achieve basic levels of literacy and numeracy, the country could receive a windfall of up to $2.2 trillion by 2095.

Mr Rorris, who authored a paper on funding for disadvantaged students for the Gonski review, said that Australian government's were faced with a clear choice.

"They can either position Australia to reap the benefits of a high performance and equitable education system or they can allow the country to bear the cost of failure," he said.

Education Minister Simon Birmingham said the federal government was committed to improving the education outcomes for all Australians.

"The union have commissioned this report to ensure that it finds exactly what they want it to find and continue to hijack the education debate to be the tired old 'we need more money' and 'money answers all' argument, while ignoring the Turnbull government's focus on those evidence based measures that improve education outcomes," Mr Birmingham said.

AEU Federal President Correna Haythorpe said that Australia's levels of inequity are high compared with the OECD average and a demographically similar country like Canada.

"Mr Turnbull needs to recognise the long-term economic benefits of ensuring all children leave school with the skills they need for the workforce," Ms Haythorpe said.

"We know that one in seven 15-year-olds struggles to read properly, and one in five struggles with basic maths. These are the students who risk leaving school without the skills they need for work and life," she said.