Australia's next top public servant says living standards are slipping, the tax system looks like it is from the 1950s, and the nation needs to have an “adult” debate on tax reform.

Martin Parkinson, the new secretary of the Department of Prime Minister and Cabinet, has told a business lunch in Sydney that the tax system needs to give up its reliance on income and corporate taxes.

“Our tax system today looks remarkably like it did in 1950/51,” Dr Parkinson said.

It comes as state treasurers prepare for a big session of the Council of Australian Governments (COAG) on Friday, which will hear a proposal to raise the GST to 15 per cent to cover Federal health and education cuts.

Dr Parkinson told the McKell Institute function that tax reform was necessary if Australia wanted to maintain its living standards.

“Living standards have already started to fall, you can see that in the national accounts,” he said.

“The falls are small, so most people haven't really recognised it yet.”

The former federal treasury secretary said politicians needed to treat the public “as adults” to secure tax reform.

“All of us have to be better at explaining the 'why' which really comes down to what kind of Australia do we want to have?” Dr Parkinson said.

“Do we want to have high growth, high-quality jobs ... services that our citizenry expect ... and the capacity for safety nets to ensure we're protecting the truly needy in our economy?”

Dr Parkinson said his comments were not an “insight into Government thinking”, as he had not been appointed to the new role when he accepted the invitation to speak.