A new report on Australian cities has recommended free off-peak travel on public transport and charging drivers for how much they use their cars.

The ADC Cities Report contains ideas on how to develop better, rather than bigger, cities.

It will be used to help the Federal Government form a national urban policy for Australia.

Ways to improve public transport are high on the agenda, including free off-peak travel.

Professor John Stanley from the Institute of Transport and Logistics Studies says cities need to be designed so that the need for travel is reduced.

He says introducing road pricing and charging drivers for how much they use their cars is a better solution than building more roads.

"If you're travelling for example at peak hour in a congested city, you'd pay a lot more because of those congestion costs imposed on other people than you would if you were travelling at off-peak times during the day," he said.

"There's now plenty of international evidence that the most effective way to deal with congestion quickly is to put a price on it.

"This is the only way we are going to do anything seriously and long-term to reduce congestion."

Professor Stanley says road pricing should be debated in the community over the next three years so that people are not financially disadvantaged.

Urban 'village'

Professor Stanley says to improve urban life there must be a bigger focus on improving Australia's middle suburbs, where living in houses on quarter-acre blocks seems increasingly untenable.

"I think we are trying to convey in the report a picture of more compact middle urban areas. Not Hong Kong comes to Homebush Bay. It is really sort of low-rise townhouse development we think is probably going to be the fundamental direction this is going to take," he said.

"We are talking about compact low to medium-rise developments, very high quality open space, locations that are well served by public transport, a range of options and services within walking and cycling distance.

"This means starting to focus in on the village level."

The director of programs at the ADC Forum, Anton Roux, says there are economic gains from having a large, dense city, but there are problems too.

With increased size comes economic growth, but also crime - and once a city gets too large, the additional negative consequences start to outweigh the benefits.

He says Australia needs to think very differently about its urban centres.

"Just imagine a network of city nodes, each a few hundred thousand people connected to advanced communications technology and transport access, where people don't need to travel too far from home to find meaningful work," he said.

Mr Roux says rainforests, as part of a large-scale reforestation program, could surround these hubs, while food produce could be grown in multi-storey glass houses.

Infrastructure Minister Anthony Albanese launched the report this morning in Sydney.

He says the Government will look at many of the ideas in the report, but there are others he is not so sure about.

"There is much that I agree with in this report. I think the general thrust is very consistent with where the Government has gone on these issues," he said.

"There are some ideas in there that I would need some convincing on, but that is the whole point. This is about debate and dialogue."