The reading standards and completion rates of a large number of Australian high school students have fallen to alarming levels, according to new research.

A report released by the Mitchell Institute on Monday found that about 26 per cent (or 81,199) of young people had not finished Year 12 or a Certificate III equivalent by the age of 19.

Mitchell Institute director Dr Sara Glover said the figures were extremely disappointing and concerning.

“Overall we see this as a real waste of potential talent,” Dr Glover said.

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The report also revealed that 28.4 per cent of Australian Year 7 students are not meeting international reading standards.

Dr Glover said better targeted curriculums in disadvantaged schools as well as more money would help to combat the widening education divide in Australia.

“We want to see the resources go to where it’s needed and so the principle of Gonski funding was just that,” she said.

“We would like to see not only that happen but to be sustained into the future.”

The Educational Opportunity in Australia 2015 report also exposed an alarming difference between advantaged and disadvantaged students.

It showed 40 per cent of Australia’s poorest 19-year-olds left school early, compared to only 10 per cent of the wealthiest.

More than a quarter of Australian Year 7 students are not meeting international reading standards.

“What we do know is that it is skewed towards the more disadvantaged students, so students from low SES backgrounds and indeed Indigenous students,” she said.

Disadvantaged students performed proportionally 20 per cent worse in relation to academic benchmarks, than all other students.

The study found roughly a quarter of students are falling behind from their early school years.

“It is surprising to see the depth of disadvantage viewed over multiple stages of schooling,” Emeritus Professor of Education at Melbourne University Richard Teese said.

“The gap emerges in home life before children go even to preschool.

“It is difficult to address, but the evidence is that children from very poor backgrounds are quite capable of succeeding and reaching the norms attained by the more advanced children, providing that the conditions under which they’re schooled improve.”

Professor Shelley Mallett from the Brotherhood of St Laurence said it contributes to Australia’s high youth unemployment rate.

“What we’re seeing across the country is a rise in youth unemployment rates,” she said.

“We’ve got around 14 per cent with higher rates up to 20 per cent in rural and regional areas.”

A spokesperson for Education Minister Simon Birmingham defended the government’s handling of schooling, telling Fairfax Media it had invested a “record total funding of $69.5 billion over the four years to 2018-19 – a 27.9 per cent increase across all schools over the 2014-15 baseline”.

– with ABC