Treasury Secretary Martin Parkinson is warning Australians face declining living standards if they do not increase productivity.

In a strongly worded speech in Melbourne last night, Dr Parkinson blamed what he called populist media campaigns for undermining bipartisan support for reform.

The Treasury Secretary said Australia could not rely on the mining boom to prop up the economy and if productivity was not improved, incomes would take a dive.

"Our productivity growth, again measured in terms of both labour productivity or multi-factor productivity, has slowed and importantly there's little reason to believe it will improve in the immediate term," he said.

"Indeed the rate of improvement in the living standards of Australians, or at least that part that's captured by income measures, has already begun to deteriorate, even with the sustained and unprecedented rise in the terms of trade."

Dr Parkinson, one of Australia's most powerful government officials, has also sounded a note of caution in the growing debate over foreign ownership.

He warns politicians to tread cautiously.

"The issue around whether foreign ownership, whether it's of the mining sector or of agricultural sector, has to be handled quite carefully," he said.

"You can see there have been a number of political interventions this week.

"I just hope that they are handled with clear recognition of where Australia's national interest lies."

The debate has resurfaced after a state-controlled Chinese mining company bought 43 farms in northern New South Wales.

The Greens, independent Senator Nick Xenophon and Nationals Senator Barnaby Joyce want a review of foreign investment laws.

Senator Joyce says they need to be tightened to guard rich agricultural land for food production.

And independent MP Tony Windsor wants what he calls "sensitive lands" to be protected from mining.

But Dr Parkinson says foreign investment is in Australia's national interest because there simply is not enough capital domestically to invest in developing assets.

"Once we get into the world of discouraging capital from any source, you know it's got to be a legitimate source, but once we're in the world of discouraging capital to come to Australia we are actually making a deliberate decision to lower our own potential wealth," he said.

But at the same time, Dr Parkinson says Australia needs to get the right price for its valuable non-renewable resources, suggesting there is scope to increase taxes on the mining sector.

"Once sold, those assets cannot yield any further return for Australia's citizens," he said.

"This means that it is critical that society receives an appropriate return on the assets rather than the value being captured solely by the Australian and foreign shareholders of the companies that sell the assets.

"Arguably, this is not presently the case."

Dr Parkinson says economic reforms should make it easier for people to move to rapidly growing mining areas.

He says lower stamp duty - which could encourage people to sell their houses and move - and other reforms that would make it easier for people to transition to new jobs were a sensible approach.

"Tax reforms that improve resource allocation and improve mobility, and especially state taxes such as stamp duty and property tax," he said.

"Appropriate reforms to tackle climate change at minimum cost also make sense."