The article, co-authored by psychology professor Christopher Boyle, also suggested parents are motivated to maintain the myth of the festive figure out of a selfish desire to relive their childhood.
Dr McKay says the children she works with on Nauru are perfectly happy not having the Santa tradition.
"I think it's easy to get that tradition to change, the Santa tradition is a relatively new one," she told the Daily Telegraph.
"It's not about necessarily getting rid of Santa but understanding why you're choosing to have Santa and why that's important to you and having those really important conversations about lying."
But Michel Carr-Gregg, a child psychologist, said Santa Claus was an important part of Australian culture and makes Christmas magic.
"For many families the excitement of leaving stuff out for Santa, watching through the window at night, they're just lovely traditions," he told the Daily Telegraph.