A new analysis suggests boosting the childcare subsidy would encourage people back to work and help lift the economy on the path to recovery from its first recession in almost three decades.
A study by consultants KPMG found many families lose two-thirds or more of the income they would gain from an additional day's work.
Early childhood education advocates Front Project says Australian families are increasingly financially insecure because of the COVID-19 pandemic.
"Access to affordable and high-quality early childhood education services are vital for parents to be able to return to work to secure their family's financial situation," Front Project CEO Jane Hunt said.
It calls for the maximum subsidy to be increased to 95 per cent of the hourly rate cap from 85 per cent.
Families with a combined income of $80,000 would receive the maximum subsidy, up from $68,000 now.
The subsidy would have a gradual taper rate of one per cent for every additional $4000 families earn.
It also wants all families to receive a minimum 30 per cent subsidy, regardless of what they earn.
KPMG estimates the addition subsidy of around $2.5 billion would deliver immediate economic stimulus and long-term growth, enabling between 160,000 and 210,000 additional working days per week
That would equate to 30,000-40,000 full time jobs and increase gross domestic product by $5.4 billion, supporting a strong recovery from the impacts of the coronavirus.
"We need more families with more money in their pocket and more time to invest in their careers and the economy," Ms Hunt said.
"This is not free child care, this is a measured, evidenced-based approach, which recognises the huge demands on the federal government."