The inquiry's report released on Tuesday echoes an independent report sitting with NSW Premier Dominic Perrottet, which also recommends dismantling Resilience NSW and purchasing land from flood victims.
Tuesday's report said emergency services were unprepared and uncoordinated for the February-March floods that left 13 people dead, 4000 homes destroyed and potentially up to $3 billion in damages across the Northern Rivers and Hawkesbury regions.
The report also said the government failed to provide services like housing and cash relief in time, and state infrastructure was not ready for the extent of the floods.
Labor's Walt Secord, who chaired the inquiry, said agencies failed to provide coordinated relief "in the community's greatest time of need".
"Put simply, the community was forced to save themselves; neighbour saving neighbour," Mr Secord said in the report.
"While this is an admirable testament to these communities, it is both unreasonable and undesirable as a matter of public policy."
The parliamentary inquiry, led by Labor, Greens and Shooters and Fishers MPs, heard heated criticism of the state and federal response.
Victims spoke of emergency help coming too late during the events, while recovery efforts were too slow.
The report said the SES should be restructured to harness local knowledge, coordinate with other rescue agencies, boost paid staff salaries and push for more volunteers.
Resilience NSW should also be abolished unless its role is clarified and its policies become more focused on meeting community needs.
Mr Secord told parliament the agency should be abolished, with the report finding it failed to provide leadership or coordinate recovery efforts with locals.
"Resilience NSW demonstrated some of the biggest failures of the NSW government's response to the floods," he said.
The report said Service NSW workers should be trained to help staff relief centres in flood zones, and to get on the ground fast to assess grant applications.
First Nations people should also be included in community consultation on how to better prepare and resist future floods as well as recover from those of February and May.
The report found the government and telecommunications companies failed to ensure flooded communities had emergency communications after infrastructure was destroyed.
In the government's independent report, lead by former NSW police commissioner Mick Fuller, the premier has reportedly been told to dismantle disaster response agency Resilience NSW and sack its head, Shane Fitzsimmons.
It has also suggested buybacks and land swaps for people in flood-prone areas.
Mr Perrottet has committed to releasing the report but has failed to clarify when.
"We're currently working through the flood inquiry," he said on Tuesday.
The Business Council of Co-operatives and Mutuals has suggested the establishment of a National Co-operative Disaster Recovery Centre of Excellence, that would provide a talent pool of disaster workers.
Chief executive Melina Morrison said disaster impact areas may not always have the local workforce on call to respond.
Prior to the report being released, Emergency Services Minister Steph Cooke thanked the emergency services volunteers and staff, including those involved in the more recent June-July flood response.
"Their efforts make me proud," she said.
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