The South Australian government will push ahead with establishing a state-based productivity commission despite "untenable" changes to the legislation demanded by crossbenchers and the opposition.
Treasurer Rob Lucas says the government will establish the commission, a key election commitment, through administrative measures rather than through legislation in the parliament.
"Our hand has been forced," Mr Lucas said on Friday.
The treasurer said amendments sought in the Legislative Council would have allowed the upper house to force inquiries into productivity commission issues at their discretion.
He said that was "unreasonable, unworkable and untenable".
"No productivity commission in Australia operates in this way," the treasurer said.
But opposition treasury spokesman Stephen Mullighan described the government's decision as a "humiliating" backdown.
Mr Mullighan said the proposed amendments to the bill would have improved the transparency and accountability of the commission's membership and operations.
"This has been a humiliating start for the new Liberal government," he said.
"The government needs to start working with the other political parties in parliament or else it will find itself with a wasted four years in government."
Once established, now possibly as a division of treasury, the Liberals' state-based commission will act as an advisory group to help drive economic reform and grow the SA economy.