Greater co-ordination between federal and state governments on resource exploration approvals is needed, along with more transparency, the Productivity Commission says in a report to be released on Friday.
The commission also calls for "evidence-based" controls on coal seam gas activity.
The report comes as explorers have cut spending amid declining commodity prices and heightened economic uncertainty, with many operators complaining of red tape and duplication between state and federal governments when seeking approvals.
Spending on new export gas projects in Queensland and northern Australia is close to peaking, prompting concern this will lead to a broad economic slowdown and putting pressure on the exploration sector to begin picking up some of the slack.
Explorers complain of the duplication of regulation, although much of this could be resolved if an earlier agreement by federal and state governments to co-ordinate in areas of "national environmental significance" are implemented.
"Progress towards achieving this reform has halted," the commission notes.
It also calls for an end to duplication in offshore exploration, with the National Offshore Petroleum Safety and Environmental Management Authority to be given full control over environmental assessment, rather than spreading it across two agencies, which is the case at present.
State governments should also cede their controls in this area to the authority, the report says.
The commission highlights the need for an "evidence-based" approach in coal seam gas exploration.
"Regulation of [coal-seam gas] exploration activities should be directed towards maximising the economic, social and environmental benefit of the use of the land for the whole community," it says.
"Scientific uncertainty should not lead to poor regulatory processes or decisions. A precautionary approach should be adopted where there is concern of substantial or permanent damage.
"A lack of certainty should not be used to justify a lack of action to mitigate or prevent such damage."
The report notes that after a period of poor community involvement, some explorers are now more than meeting government requirements in a bid to gain "social licence" to explore.
At the same time, government should ensure rules are evidence-based and appropriate for the level of risk, it says. Twice as many people work in resources exploration now than a decade ago, the commission says, although the number peaked in 2008, declining after the global financial crisis.