The money, which would be available only to institutions with more than 50 research staff involved in a project, should include $24 million of new cash with the $26 million already allocated to undergraduate research "top-ups".
The Government should also aim to increase the size of the fund to $100 million a year within five years, says the report.
It was written by the Tertiary Education Advisory Commission (Teac), set up by the Government last year to advise it on tertiary options and ways to promote the knowledge economy.
Teac may change the draft report obtained by the Herald before delivering it to the Government next month.
The report recommends giving institutions a firm cash commitment for at least two years and suggests changes to the way some students are funded.
Students' Association co-president Andrew Campbell said he supported any moves to promote tertiary education to low achievers.
But he was angry at proposed changes to the student allowance scheme.
The report has recommended a new "relatively extensive capping system" which would take effect during the second year of a degree course and mainly affect students in undergraduate programmes such as arts, commerce and business.
The report is expected to be made public in November.
