A year-long study from the Federal Government's advisory group on drugs has found drug testing in schools would be a waste of money.

The report was commissioned by the Australian National Council on Drugs after debate in the community about compulsory drug testing in schools.

It found that any testing system would be ineffective and not always give the right results.

Report author Ann Roche says it would also have negative effects like creating mistrust and stigma.

"Level of use is actually quite low so you're kind of looking for a needle in a haystack, therefore there'll be more error," she said.

"To falsely accuse a young person of illicit drug use is really problematic."

The study found it would cost about $350 million to do a saliva test for every student in the country and it says that money could be better spent elsewhere.

New South Wales Education Minister John Della Bosca says he agrees with the report's recommendations.

Mr Della Bosca says it would also be monumental waste of taxpayer funds.

"Fewer than 2 per cent of our suspensions and expulsions were resulting from drug use or drug selling in schools," he said.

"If students are suspended for using or possessing drugs at school, part of their return to school program will involve anti-drug counselling. This is a far more effective way of dealing with illicit drug use."