The commonwealth public service has grown to about 257,000 people and has too many middle-managers paid between $120,000 and $147,000 a year, it says.
"As a broad guide, the commission expects that some 15,000 fewer public servants could be required."
The eight biggest departments have been asked to prepare plans to trim the number of junior and middle-managers, who make up about 40 per cent of their staffing.
Human resource managers, financial and procurement officers and other officials involved in so-called "corporate services" are in the firing line.
The Finance Department should examine all government spending on HR, in a bid to cut costs, and the largest departments should take over the corporate roles of all of their portfolio agencies with fewer than 200 staff.
Jobs could also be shed at the Department of Foreign Affairs, which already has swallowed up AusAID and takes in Austrade, Tourism Australia and the Export Finance and Insurance Corporation.
Tourism Australia and Austrade were singled out by the commission for being wasteful.
Austrade's $335 million a year budget didn't appear to represent "value for money", the report said, while tourism funding should be halved because its benefits are not obvious.
The report lists 42 government bodies for abolition, 10 to be sold off, and a further 838 to be merged with other bodies, consolidated into a department, or reviewed with the possibility of abolition or merger.
Some of the biggest targets for abolition are the Clean Energy Finance Corporation and Climate Change Authority - which is in line with coalition election promises - as well as Low Carbon Australia and IIF Investments.
Significant merger targets are the refugee and migrant review tribunals, and Indigenous Business Australia and the Indigenous Land Corporation.
The report said the government should consider selling Australia Post, NBN Co, Defence Housing Australia, Australian Submarine Corp, Australian Hearing, Australian Rail Track Corp and the Royal Australian Mint.
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