The inquiry by the standing committee on agriculture and industry has also urged the states to consider following the Northern Territory and force restaurants into disclosing where seafood is caught.

If adopted, a new system of labelling would prevent the term "grown in Australia" from being used unless 100 per cent of the product is Australian.

Amid widespread frustration by farmers and consumers, the baffling term "made in Australia from local and imported ingredients" would be forbidden in favour of detail on whether a product packaged or canned in Australia contained more or less than 50 per cent local ingredients.

But the committee shied away from recommending that labels must identify the country of origin of imported foods, saying that might threaten trade agreements.

There have been 11 parliamentary inquiries into food labelling since 2003 but the committee found that confusion and distrust remained widespread.

Some of the major irritants include added water being considered a local ingredient. For example, imported juice concentrate can currently be labelled as being Australian made from local and imported ingredients purely because it is bottled here with Australian water.

Australian Pork Ltd told the committee that most consumers are unaware that 70 per cent of "Australian made" ham and bacon is made from imported pork.

It is estimated that 90 per cent of imported concentrate juice comes from China, where fruit pickers are paid $3 an hour compared with $25 an hour in Australia.

"The level of dissatisfaction with the existing labelling framework indicates that a system which is designed to inform and guide industry and consumers may need to be overhauled," the report found.

"The committee agrees with the view that there must be a separation between the manufacture and the ingredients aspects of a country of origin label."

The committee recommended that the Northern Territory's country of origin labelling of be referred to the Council of Australian Governments for consideration.

Up to 70 per cent of seafood consumed in Australia is imported. Currently, there is a requirement to notify consumers of the fish species but not whether the product is imported or Australian harvested.

Rob Fish, chairman of the Northern Territory Seafood Council, said many NT restaurants moved to selling local product once the new rules for menus were cast.

Restaurant & Catering Australia chief executive John Hart said a mandated labelling system for menus nationwide would be "incredibly onerous and very expensive to administer", with an estimated cost of $300 million per annum to introduce.