Race Discrimination Commissioner Giridharan Sivaraman said systemic racism could take form in the lack of recognition of skills for some migrants and forcing some groups to undertake English proficiency tests.
"The person feels diminished, that they're not valued, and it's it really hollows them out," he said.
"Our economy is impacted dramatically in that there's a huge loss in productivity by failing to have people work at the skills, skill levels that they can actually meet.
"It means we continue to have shortages in critical areas where we need skilled workers. It impacts their health and wellbeing of workers."
Australian Council of Trade Unions President Michele O'Neil said the union received complaints in every industry and sector and an inquiry could help quantify the effect racism has on the economy.
"Many people who are discriminated against or face racism, don't feel able to speak up at work ... we need to make sure that we realise that racism is a systemic problem across Australian workplaces," she said.
"We know that it doesn't just affect and corrode the experience of an individual, but it is actually a problem with productivity and how effective workplaces are."
Mr Sivaraman said an inquiry was needed because of the poor data collection and lack of a unified approach in addressing workplace racism.
"Shining a light on systemic racism in the workforce is something that ultimately will be of enormous benefit, because it allows us to fix entrenched problems that will improve our society, improve our economy, and improve people's lives," Mr Sivaraman said.
The impacts on Indigenous people, migrants and culturally diverse people would be focused on in particular.
Labor is yet to commit to the national anti-racism framework, which was handed down by the Australian Human Rights Commission last November.
11°C