An independent expert panel has recommended that Australia process asylum seekers in Papua New Guinea and Nauru while the people swap deal with Malaysia should "be built on further" rather than discarded out of hand.
The panel did not recommend immediately sending refugees to Malaysia.
The panel, headed up by former Defence chief Angus Houston, handed down its 22 recommendations in Canberra today.
The Houston panel, which Prime Minister Julia Gillard appointed in June, also recommends that Australia's humanitarian program is immediately increased to 20,000 places per year, with a consideration to 27,000 within five years.
The report has already had a thumbs up from independent MP Rob Oakshott.
"Briefing with former CDF complete. Good strategy proposed. Time to get on with it, and for the Parliament to pass appropriate legislation," Mr Oakeshott posted Twitter.
Mr Houston told reporters in Canberra that the review had been a "challenging" task and that there were no simple solutions. He said the recommendations were "an integrated set of proposals".
He said that the panel had briefed Ms Gillard as well as Opposition Leader Tony Abbott, the Greens and the independents on their findings.
He said the group, which also included former diplomat Michael L'Estrange and refugee expert Paris Aristotle, wanted to see policy that was "hard-headed but not hard hearted".
The former Defence chief said the independent panel had been "deeply concerned" about the loss of life at sea.
"To do nothing is unacceptable," he said.
He added that it was in Australia's national interest to coordinate better with regional and source countries.
He said that the panel believed that a "no advantage" principle should apply "whereby irregular migrants gain no benefit by choosing the circumvent regular migration mechanisms".
He said that there needed to be incentives to use "regular pathways" to reach Australia and disincentives to try and come by boat.
Mr Houston said that the large backlog in the special humanitarian program needed to be addressed.
A strategy to ''significantly'' increase in resettlement places provided by Australia to war-torn countries in the Middle East and Asia region should be developed.
Legislation to support regional offshore processing should be immediately introduced into the Parliament, and processing centres should be immediately established in Nauru and Papua New Guinea.
The people swap deal with Malaysia should be ''built on, not discarded'' but the panel warned if it was to work, protection measures and safety guarantees for the fate of asylum seekers sent from Australia to Malaysia were needed.
The panel believed these measures ''did not currently exist but could in the future''.
Among the panel's other recommendations included a call for immediate bilateral cooperation on asylum seeker issues with Indonesia.
There should also be an increase in the allocation of resettlement places available to Indonesians under Australia's humanatarian program, enhanced co-operation on joint surveillance, law enforcement and search and rescue coordination.
The panel said Australia's laws that jailed Indonesian minors who crewed boats on the unlawful boat voyages needed to be reviewed. Australia should continue to develop its relationship with Malaysia including a greater number of refugees to be accepted from the country into Australia.
MORE TO COME