The federal watchdog says the government must speed up processing of asylum seekers and take better care of their mental health.
The comments come a day after Immigration Minister Chris Bowen announced a new immigration detention centre for Darwin.
Commonwealth Ombudsman Allan Asher said that while the new centre could improve the situation for asylum seeker children and families, more needed to be done.
Last month Mr Asher's review of the Christmas Island facility found resources stretched and that, given the rising number of people seeking refuge, its operation was unsustainable.
"I remain concern about timeliness in processing refugee applications, delays in security agency clearances and various health issues - particularly those related to mental health," Mr Asher said in a statement.
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He said it was important the government pushed ahead with more mainland facilities, and community-based detention especially, for unaccompanied minors and families with children.
Greens immigration spokeswoman Senator Sarah Hanson-Young said there were 900 people who had been classed as refugees but were awaiting security checks.
"They are not processing their claims quickly enough," she said. Mr Bowen said the 1500-bed complex would accommodate single men, with the first 500 beds expected by the middle of the year.
The RAAF base near Weipa in north Queensland will also be used for detention accommodation for another year.
Mr Bowen, who admitted the facilities are under pressure, said he could not predict how many asylum seekers were expected in coming months.
"It's just appropriate that we have the contingencies in place and make sure that our detention centres are not overcrowded," Mr Bowen told ABC radio. "I think people would rightly criticise me if I didn't take those sort of measures."
Mr Bowen said the government was sticking to its plan to negotiate a regional strategy and offshore processing centre in East Timor, despite concerns being raised by senior Timor government officials about the idea.
"Of course it is controversial in East Timor - we will continue to discuss the concept of a centre with East Timor," he said.
Opposition Leader Tony Abbott says the only one way to stop overcrowding was to "stop the boats".
"The boats will just keep coming unless the government changes policy," he said.
The Refugee Council of Australia said building a new detention centre in Darwin was a short-term fix and would not resolve the underlying problems with government policy.
Australia should look to Europe and the United States where asylum seekers are released into community detention after basic identity and health checks, it said.
