Act is challenging National to allow successful schools to expand, allowing Auckland Grammar, for example, to set up a campus in Mangere or Porirua in the way that Massey University has expanded to Auckland and Wellington.
Leader Don Brash also suggested copying a 1992 development in Sweden to allow any group to open a school and to receive state funding as long as they do not select their students on an academic basis.
"Montessori, Steiner, Catholic, Protestant, Muslim, Buddhist, Humanist, Objectivist, Marxist, Austrian - let the system be open to all-comers willing to prove their worth in an open market place of educational practices and philosophies," he said at the Act Party's Wellington regional conference.
Dr Brash also challenged National to give schools and parents greater flexibility by reintroducing bulk-funding.
This would allow school boards to negotiate pay directly with individual teachers (effectively performance pay), make funding follow the pupil with education vouchers, allow parents to send their child to any school they wished, and publish school results as Australia does on the Myschool website.
"There'd be no quicker way of incentivising existing schools to lift their game," Dr Brash said. Schools that once had guaranteed state funding would now have to answer to the parents. "Bad schools would close because their once-captive audience would have been freed."
Dr Brash said the education system gave choices only to wealthy parents - those who could afford private schools or to buy into the "right zone". Act's education policy would overwhelmingly benefit the less well-off.
He said teaching the basics, reading writing and arithmetic, had been "increasingly usurped by the desire to indoctrinate".
"Many teachers find it far more important to teach our children that capitalism is evil, that the problems of the world are all caused by colonisation and that climate science is completely settled."
Education Minister Anne Tolley at the weekend ruled out one of the policies on Act's wish-list - performance pay for teachers - saying the Government had other priorities.
"You've got to pick the fights that you have," she said on TV3's The Nation on Saturday.
She also gave an undertaking that parents would not have to pay anything extra for 20 hours universal early childhood education for 3- and 4-year-olds.