This report examines current knowledge about the nature, development, and consequences of competition and market reform in the Australian vocational education and training (VET) sector. In the process, the policy context and key aspects of the theory and practice of a competitive training market are analyzed. These other topics related to the training market are discussed: preconditions for an effective training market; failure of the training market; size, structure, and composition of the training market; and types and levels of competition in the training market. Two forms of models of competition and market reform are described. The supply side models include performance agreements, competitive tendering, and preferred supplier arrangements. The demand side models include fee-for-service, user choice, intermediaries, and vouchers. The relative advantages and disadvantages of different resource allocation mechanisms are analyzed. Central policy issues are explored, including the role of government and approaches to the funding and regulation of VET. Six key policy issues are examined: clients and control over training decisions; VET products; access and equity; community service obligations; competitive neutrality; and costing and pricing. Research on the social, economic, educational, and political impacts and consequences of competition and market reform is reviewed. Some directions for further research are suggested. The report contains 108 references. (YLB)