The Turnbull government is considering a radical shake-up of Australia's superannuation system that would pit banks and industry funds against each other for the right to manage the deposits of every new entrant for at least two years.

The shift, detailed in an issues paper released by the Productivity Commission on Tuesday, would centralise the decision about which default fund new employees were placed into, taking it out of the hands of employers and making it the result of a national tender.

Calculations by the Grattan Institute suggest it could slice $1.5 billion per year from the fees charged by default funds and put downward pressure on the fees charged by other funds.

Treasurer Scott Morrison has asked the Commission to examine the idea of a formal competitive process, commended by the Murray financial system inquiry as likely to reduce the costs for funds and compliance costs for employers.