Universities are failing to fill gaps left by Victoria's skills shortages and the state government needs to intervene to push students towards critical industries, a parliamentary committee suggests.
The committee pointed to priority sectors like community services, health, engineering, the "clean economy" and agriculture, saying the onus is on universities to give graduates the skills and confidence needed to alleviate shortages.
Universities could help in the long term by increasing enrolments in priority sector courses and focusing on student retention, with awareness campaigns - particularly for secondary students - playing an integral role, the committee says.
They should work with industry when developing course content to make sure students graduate with the required skills, and engage with their communities to ensure skills shortages are addressed in a way that's fit for purpose.
"The university sector can play a pivotal role in solidifying the future of Victoria's skilled workforce in priority employment areas," committee chair John Eren said.
"Universities' potential to produce graduates with the skills required by industry is currently untapped."
The committee recommended the Victorian government work with the state's universities, industry and peak bodies to overhaul tertiary education through a universal framework for work-integrated learning.
The government could help fill gaps in critical industries by encouraging and supporting businesses to host student placements, and pushing more disadvantaged students into work-integrated learning, the committee said.
It could expand work-integrated learning in the public sector and increase industry education opportunities in regional areas, or where it was mandatory for a given course.
The state government could also look at improving learning pathways between TAFE and university, letting students move more easily between them, the committee said.
"The importance of partnerships, collaboration and engagement between governments, universities, vocational education providers, industry and local communities cannot be understated," Mr Eren said.
"Capitalising on these relationships can ensure better outcomes for university graduates and the sectors they are subsequently employed in."
The committee also recommended the government create an online platform to meet work placement supply and demand.
Universities Australia, the peak national body for universities, acknowledged the committee made a range of important recommendations.
Universities know that work placements reap huge benefits for both students and employers, the body's chief executive Catriona Jackson said.
"Research tells us that a hands-on, work-integrated learning place is the strongest single factor that gets graduates into work that is related to their study fast and sustainably," Ms Jackson said.
"Last we counted there were half a million of these placements - from industry, private and public. We could use twice as many."
Universities stand ready to partner with industry to deliver better results for students, employers and the Australian economy, Ms Jackson said.
The state government has until March to respond to the committee's 31 recommendations.