Parts of the public service have been slammed for inefficiency in a new Productivity Commission report.

The report, Measuring and Improving State Sector Productivity, was commissioned by the previous government and said the private sector measured its productivity but the public sector fell short.

This was despite $40 billion being spent annually on government services such as health, education, justice, law and order and social welfare.

"The New Zealand government has been organised around outputs since the late 1980s," the report said.

"Despite this, the commission found that for large parts of the state sector, there is little measurement or understanding of productivity.

"In some sectors ... agencies were either unwilling to conduct productivity assessments, or were unable to bring together the data needed for such studies.

"The public sector financial management system provides weak incentives for agencies to seek productivity gains," it said.

"Most attention [is] focused on gaining new revenue rather than optimising existing spending.

"There appears to be little demand for productivity measures from Ministers, and insufficient demand from senior public sector leaders for the necessary information and analysis."

This was not good enough, Productivity Commission chairman Murray Sherwin said.

"The state sector spends more than $40 billion every year on public services," he said.

"Measuring productivity is essential for knowing if the money is being well spent."

A PSA national secretary, Glenn Barclay, said the report was narrow-focused and productivity was only a small part of an agency's overall performance.

"The problem that the report has is a narrow frame that doesn't look at wider issues such as performance generally and not just about productivity.

"There are no effective measures of productivity within the public service and that's not just a New Zealand issue, it's a global problem."

Submissions on the draft report are due by March next year with the final report due to the government by the end of August.