State governments are being encouraged to open up the delivery of health and education services to the private sector.
The push for more competition was recommended by the Harper Review, which will be put before state and territory treasurers at their next meeting, scheduled for later this month.
Federal Treasurer Scott Morrison told News Corp Australia on Saturday the review highlighted a number of areas overseen by the states "where they thought things could be done a lot better".
Finance Minister Mathias Cormann said the idea would include a diversity of providers competing with each other to deliver better services, both in terms of quality and cost.
"That is of course good for patients and it is good for our country as a whole," he told Sky News, specifically on health care.
Senator Cormann cited a growing demand for services, particularly given the country's ageing population.
Labor concedes it's true there should be competition to ensure more efficient spending.
But opposition MP Michael Danby criticised the federal government's cuts in health and education funding to the states.
"It's very hard for people to find efficiencies within that massive cutback," he told Sky News.
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