The latest interim report from the Productivity Commission has recommended policy settings to drive innovation should be targeting a wider array of businesses of all sizes, which would lift the performance of the economy overall.

In its report, the commission found there were "worrying signs" knowledge and information was not widely being shared across the economy, with rates of information sharing between businesses stalling.

Shortages in labour and workers not moving between sectors were an attributing factor to the slowdown in the transfer of information between firms.

"There are worrying signs that the principal vehicles for acquiring and transferring knowledge - what we refer to as diffusion - have slowed or stalled," Productivity Commission deputy chair Alex Robson said.

"While previously we could have relied on labour mobility and investment in machinery, equipment and intangible capital to spread ideas, these have all been either stagnating or declining."

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Treasurer Jim Chalmers said the commonwealth would prioritise boosting productivity.

"The report shows that while the ball got dropped in the past, there are significant opportunities to boost productivity, including through greater collaboration," Dr Chalmers said.

"The Government takes this challenge seriously which is why we've committed to a range of productivity-enhancing investments including in childcare, energy and skills."

Dr Robson said there is evidence rates of diffusion of knowledge would be better served from a more open trade and investment regime, rather than targeted policies from government.

"At the individual business level, things like managers' ability to exploit existing innovation, increasing knowledge through recruitment decisions, leveraging industry bodies to connect firms with information about new and better ways of operating, and linkages with universities beyond direct commercialisation can all drive productivity and improve performance," Dr Robson said.

"For example, information about advances and how businesses are tracking compared to industry best practice needs to be taken up more broadly. Many businesses undertake little or no assessment of their performance, even though this is a major motivator and route to improvement."

Skilled migration was also a factor raised in the report.

The Albanese Government has already invoked a temporary increase in the skilled migration cap to 195,000 from 160,000 due to severe worker shortages across the economy.

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