The think tank also wants the childcare subsidy to be abolished and replaced with a "child-centred" model where early years education centres are funded directly.
Anthony Albanese says the government is awaiting a Productivity Commission report on childcare. (Lukas Coch/AAP PHOTOS)
Prime Minister Anthony Albanese welcomed the "important contribution" to the debate and said Labor went to the election with the ambition of delivering universal childcare.
"Universal child care provision, as it is in a range of other countries, is something that is a valued national asset," he told reporters on Wednesday.
Denmark, Germany, Sweden and Norway have all legislated entitlements for early childhood services, and studies have shown where there is free or low-cost universal education available, attendance tends to be high.
Universal or low-cost early learning could boost tax revenue in Australia each year by as much as $3.2 billion and economic growth by $6.9 billion from parents working more hours, modelling suggests.
The federal government was waiting on the final report from the Productivity Commission before taking its next steps, the prime minister said.
Preliminary findings from the microeconomic policy body as well as a separate probe by the Australian Competition and Consumer Commission found the system to be complex, costly, and availability patchy in some parts of the country.
Childcare policies need an overhaul, experts say. (Brendan Esposito/AAP PHOTOS)
Centre for Policy Development chief executive officer Andrew Hudson said Australia's system was broken.
About 22 per cent of kids start school developmentally vulnerable and more than 120,000 children did not attend early learning at all due to activity test rules and other reasons.
"We have these universal systems, whether it's schooling, Medicare or superannuation, and why should we stop that universal public schooling at age five?" Mr Hudson told AAP.
Making all young children entitled to at least three days a week of free childcare or at a low set fee, say $10 a day, was a key recommendation of the think tank's report.
Those experiencing disadvantage should be entitled to up to five days a week of free care.
The think tank wanted the childcare subsidy to be abolished and replaced with a "child-centred" model where early years education centres are funded directly.
Georgie Dent, chief executive officer of parent and carer group The Parenthood, said replacing the childcare subsidy system with direct funding for centres would ease pressure on families.
"The current subsidy system is overly complex and creates unnecessary barriers for families," she said.
Georgie Dent says the current system is difficult for parents and carers. (Mick Tsikas/AAP PHOTOS)
Jay Weatherill, of Minderoo Foundation's Thrive by Five campaign, said parents were struggling to afford early childhood education and languishing on year-long wait lists.
He said primary carers, mainly women, were paying the price through interrupted careers.
Mr Hudson said getting women back into the workforce was the "single biggest productivity gain we can make".
"This is just a classic win-win," he said.
Children would get the support that they needed, he said, and women wanting to work would be able to, boosting workforce participation.
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