A major crackdown on the exploitation of garment workers has been launched as part of a high-profile bid to improve the pay and working conditions of clothing employees.

Called Behind the Label: the NSW Clothing Outwork Strategy, the A$4 million programme was launched in Sydney by the New South Wales government on Friday.

The three-year programme includes a voluntary code of practice for fashion retailers with the code likely to be made law in 12 months if it does not have a significant impact.

The scheme was launched by Industrial Relations Minister John Della Bosca who said state officials were committed to improving conditions for garment outworkers.

"Australia's 300,000 outworkers are among the vulnerable people in our workforce, paid as little as $2-an-hour," he said. "The NSW government is committed to abolishing the exploitation of home-based workers."

He added the campaign would result in a climb in clothing prices and a label would be produced to tell customers whether clothes are made ethically in a move backed up by a "name and shame campaign".

Union chiefs welcomed the move as they claim up to 90 per cent of clothes are produced by exploited workers.