Revealing that agriculture is the only one of a dozen industries studied to be "strongly competitive", the report calls on the Abbott government to develop and back different strategies for different sectors of the economy to lift growth.

It warns of a "long, painful adjustment" unless a new approach is embraced and backed by a host of other policy changes to boost innovation and workforce participation, mobility and productivity.

The report calls on the government to identify adjustments that are needed to make each sector of the economy more globally focused, with the Prime Minister giving an annual progress report speech to the nation, as happens on the Closing the Gap strategy to end indigenous disadvantage.

Releasing the report on Monday, the president of the Business Council of Australia, Catherine Livingstone, said: "If we don’t do what we’re suggesting we need to do, you compromise the very essence of economic and social wellbeing.''

"If we get this right, GDP growth could be up to 3.5 per cent," says report author, McKinsey Australia’s David Dyer. "If we don’t, and we see declining participation rates and fewer jobs, it could be more like 2, 2.1 per cent growth."

While Australia has the world’s 12th largest economy, it is ranked 21st as a trading nation. Mr Dyer says the disparity cannot be explained by geography, saying New Zealand’s export-to-GDP rate is 30 per cent better than Australia’s.

Declaring Australia at a crossroads, the BCA argues that policy-makers should identify which sectors are going to "win at a global scale" and back them with policies to maximise growth. It nominates the mining, agriculture and energy sectors as priority areas.

It also proposes a host of immediate and medium-term priorities, many of them controversial, including making infrastructure payments to the states conditional on them implementing a national approach to approving major projects.

Other priorities include:

- Amending the Fair Work Act to reduce the range of matters that can be bargained over "to ensure they truly pertain to the employment relationship"

- Making the point of taxation for employee share schemes at the time at which the shares, or rights, are exercised

- Reviewing occupational health and safety licensing arrangements for priority sectors with a view to accrediting company schemes that meet the standards required by government

- Prioritising Australia’s free trade agreement agenda to maintain the country’s comparative advantage in agriculture

- Increasing the threshold for all private sector foreign investment from all countries to $1.1 billion as in the US and New Zealand

- Setting a timetable for aligning state-based retail trading hours, and removing the "most restrictive and inconsistent regulatory restrictions affecting the retail sector"

- Agreeing within 18 months to mutual recognition for occupational licences so people with valid licences in one state can work in another

- Introducing specialised teachers in mathematics and science into all primary schools and computer coding as a compulsory subject as part of the national curriculum

Called Compete to Prosper: Improving Australia’s Global Competitiveness, the report rejects the idea the proposed new direction is about "picking winners".

"What we propose is not that government select a wish list of target sectors, backed by various incentives, with scant regard for fit with Australia’s intrinsic competitive strengths," it says.

"Nor are we suggesting support for individual firms or ’national champions’.

"We are saying that economic reform is difficult, and Australia should focus scarce policy resources, time and political capital on removing the microeconomic barriers to private sector growth and on overcoming problems of coordination and incentives in areas where Australian businesses have the potential to win."

To this end, it says policy makers should "think twice" before directing incentives and resources to areas where Australia will not be able to create or sustain competitiveness.

"If Australia does not adapt, it risks a painful correction: the competitiveness problem becomes a handbrake on growth, and job-level competition leads to rising unemployment and lower wages," the report warns.

"The difference between the purposeful path and a painful correction could be worth more than one percentage point of GDP growth per annum over the next five years."