The University of Sydney report describes Australia's education system as "very good" but suggests schools need to give young people greater capacity to understand and respond to the challenges presented by artificial intelligence.
The report, commissioned by the NSW Department of Education, suggests better collaboration between educators and employers so students can understand how their knowledge can be applied in the real world.
Students need to develop skills beyond coding and understand how to respond to and use technology appropriately, the report says.
One of the report's authors, Professor Rafael Calvo, says artificial intelligence has created a "war for children's attention" and schools need to try and keep their attention on what really matters.
The report suggests schools look at healthy technology use in a similar way to how healthy eating habits are promoted.
Students need to develop skills to be able to focus on one thing for a sustained period of time and to understand how technologies may be used to manipulate emotions, the report says.
It also found the "moral panic" surrounding artificial intelligence - that robots would take over and wipe us out - was not helping young people gain the skills and understanding to thrive in a future surrounded by artificial intelligence.