Student proficiency in reading, maths, and science is decreasing.
The latest Programme for International Student Assessment survey revealed the performance of Australian students had been declining in reading since 2000, in maths since 2003, and in science since at least 2012.
Opposition Education spokesman Josh Willie said young Tasmanians were being failed by an education system that was lagging behind the nation.
"What this report shows is that many of our school students are not meeting national proficiency standards," he said.
"What's most worrying is that the PISA results show the situation has deteriorated since the last assessment in 2015."
The report said students in Australia scored higher than the OECD average in reading, not significantly different from the average in maths, and higher than average in science.
More of a rapid decline was seen in the country's lowest-achieving students in reading. In maths and science, performance declined to a similar extent at the top and the bottom of the performance distribution, as well as on average.
Overall, scores were most similar to those in New Zealand, Sweden, the United Kingdom, and the United States.
Education Minister Jeremy Rockliff said despite Mr Willie's fearmongering, the results showed the state had stabilised in maths and science following the rapid decline under the former Labor-Green government, and showed solid gains were being made in reading literacy.
The state government was committed to lifting the state's educational outcomes with a goal of 100 per cent functional literacy and numeracy, Mr Rockliff said.
"That's why we are working to extend all Tasmanian public schools to year 11 and 12, are focused on teacher quality and investing heavily in early years education to ensure children get the best start to their learning," he said.
"We know there is always more to do which is why we are investing record amounts to support improved educational outcomes in Tasmania."
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Teach for Australia founder and chief executive Melodie Potts Rosevear said Australia continued to slip behind its international peers when it came to educational performance.
"These results paint an alarming picture, especially for the students and communities that we serve," she said.
"The difference between Australian students in metropolitan schools and those in remote schools is close to two years of schooling. Indigenous students are more than two years behind their non-Indigenous counterparts."
Australian Education Union federal president Correna Haythorpe said the report held no surprises for teachers working in disadvantaged settings.
"Our teachers do a superlative job in teaching all students, but PISA shows that a gap persists in the performance of students from higher socioeconomic backgrounds as compared to lower socioeconomic backgrounds," she said.