The government will ditch its controversial union-busting legislation and start a process to overhaul the industrial relations, including simplifying awards, agreements and rules for casuals.
Industrial Relations Minister Christian Porter will lead a series of working groups to produce a new "JobMaker" package by September.
Australia's industrial relations system is not fit for purpose and has "settled into a complacency," Prime Minister Scott Morrison said on Tuesday at the National Press Club.
"The system has lost sight of its purpose to get the workplace settings right, so the enterprise - the business - can succeed, so everybody can fairly benefit from their efforts and their contributions," Mr Morrison said.
"It is a system that has, to date, retreated to tribalism, conflict, and ideological posturing. No side of that debate has been immune from those maladies. This will need to change, or more Australians will unnecessarily lose their jobs, and more Australians will be kept out of jobs."
The Ensuring Integrity legislation had been stuck in the Senate for months, but in a goodwill gesture to the union movement to encourage co-operation on the new plan, Mr Morrison said the government wouldn't be seeking another vote.
Asked whether his plan to get employers and unions in the same room to come up with a new plan was "the Accord version 2.0", Mr Morrison said he hoped to replicate the cooperation seen in the national cabinet process.
"It's not for the government to stick their nose in here and start pre-defining what these outcomes are. We need people to get together and sort this stuff out," he said.
"As I say, they've been caught in grooves for too long, and grooves going in parallel lines and not coming together. And that's why I'm hoping this process will achieve. It may succeed. It may fail. But I can assure you, we're going to give it everything we can."
Mr Morrison outlined five areas of focus including simplifying agreements, enterprise agreements, compliance and enforcement and greenfields agreements for new enterprises. Casuals and contractors are also on the list, with the Prime Minister referencing a Fair Work Commission decision on rights for casuals last week.
Unions and business have so far agreed change is needed, but with different sets of wishlists. Australian Council of Trade Unions secretary Sally McManus said changes need to bring better job security and fairer distribution of the country's wealth.
"The work of job creating will involve much more than industrial law changes and we will continue to put forward ideas on Australia can create good, secure jobs for workers," Ms McManus said.
Business Council chief executive Jennifer Westacott said employee agreements had become too complicated.
"There are too many things in them," Ms Westacott said.
"We have lost that focus on a system that is about how do we work together to make sure that the enterprise is successful and that workers share the benefits of that through higher wages and better conditions."
Labor has cautiously welcomed the decision to abandon the union-busting legislation, but said any reforms must protect workers.
"The demands business groups have been making in recent days - including a return to WorkChoices-style individual contracts and the scrapping of awards - suggest it will be extremely difficult to forge an IR consensus," industrial relations spokesman Tony Burke said in a statement.
"Those sorts of changes would be a disaster for workers and for the economy."
Professionals Australia, the union that represents engineers and scientists in the public service said the government's own negotiating strategy as an employer didn't bode well for workers.
"The PM's comments about this moment being a shared opportunity to fix systemic problems sound positive but are pretty opaque," ACT branch director Dale Beasley said.
"APS employees are keen to use this opportunity to discuss moving forward to a new normal, rather than reverting to the old one. We hope that that will include a consideration of the government's own policies covering industrial relations in the APS."