A project was conducted in Australia during International Literacy Year (1990) to develop appropriate ratings scales to assess adults' literacy and numeracy skills. Skills were to be measured in the types and levels of literacy and numeracy needed and achieved by adults in society today, including literacy and numeracy skills in the workplace and in daily living. Following a review of definitions and of the literature issues in assessment of literacy and numeracy, the project outlined levels of literacy and provided examples of them. Principles of assessment and reporting were discussed, and an analysis was made of the behaviors that indicate that literacies have been established. Indicators were used in surveys of adults to cover as wide a range of development as possible in each of the types of literacy. They were sorted by selecting those items that an item response model identified as forming a descriptive criterion scale. The indicators were then organized according to their relationship to one another. Matrix sampling enabled the use of a few indicators for each individual, and overlapping sets of indicators were used to map all of them onto a set of scales. For each scale, a pyramid of indicators emerged, with behaviors that almost all people exhibited at the bottom and those that few people exhibited at the top. From these behaviors, a set of competency rating scales emerged from which individual profiles could be developed. Scales were tested and revised as needed. (Appendixes include the project brief; and indicators for literacy (reading and writing) and numeracy (basic operations, measurement, and quantiative information processing). There are 139 references.) (KC)