The number of students finishing year 12 has grown over the past five years but the result is soured by a drop in school leavers moving on to full-time work or study.
A new national education report card shows 85 per cent of people aged 20 to 24 had completed year 12 or equivalent as of 2011, up from 82.8 per cent five years earlier.
Despite the progress, the Council of Australian Governments Reform Council doubts the nation will meet its target of 90 per cent year 12 completion by 2015.
And the proportion of people aged 17 to 24 who were fully involved in work or study after school dropped from 73.9 per cent to 72.7 per cent over the five years.
Although the rate of young people studying full-time increased, this gain was outstripped by a big decline in full-time employment.
The COAG Reform Council defined people as not fully engaged in work or study if they were not in full-time study, full-time work, or a combination of study and work.
COAG Reform Council deputy chairman Greg Craven said the global financial crisis would be one of the influences behind the lower post-school participation rate.
But he said the increase in year 12 completion was important because of a direct link between outcomes of parents and children.
''If more Australians are attaining the end of school, we can expect children of those Australians are going to do better,'' he said.
The results are much bleaker among disadvantaged students.
The report shows 41.7 per cent of those from the poorest backgrounds were disengaged from work or study, more than double the 17.4 per cent rate in the most well-off group, with a widening of the gap between 2006 and 2011.
The report shows no improvement in indigenous school attendance over this period, although year 12 attainment has improved 6.5 percentage points.
But after leaving school, 60.6 per cent of indigenous young people were not fully engaged in work or study - well above the 26 per cent rate among the rest of the youth population.
Brotherhood of St Laurence executive director Tony Nicholson said the disparity was ''shameful'' and he was frustrated that so little progress had been made.
''It's still extraordinary that we can't do better than that,'' he said.
Mr Nicholson, whose organisation helps deliver services to disadvantaged young people, called for funding under the Gonski school reforms to provide remedial programs.
He said the modern economy placed a premium on qualifications and skills, with non-school completion often leading to ''a life sentence of poverty and exclusion''.
Disengagement from school was typically began after students moved from primary to secondary schooling, when more independent learning was required.
Professor Craven said early childhood reforms had started to lead to improved results in primary school but secondary results were yet to improve as hoped.
One in eight working age people had only the lowest level of literacy skills and one in five had the lowest numeracy level in 2011-12, creating a barrier to workforce participation.
''Governments have their work cut out in that particular area,'' Professor Craven said.