Djokovic will be allowed into Australia after his visa ban was reversed but now has an injury cloud hanging over him. Kyrgios believes the tournament will be better for having Djokovic in the field.
"I think Novak needs to be playing at all costs," said Kyrgios.
"He's one of the greatest of all time and as long as he's going to be playing and hanging around, we need him at these tournaments. I think, as a competitor, I want to see him there.
"And if I win a tournament, if you don't go through Novak, then you kind of know the tournament isn't really a tournament."
Kyrgios missed out on a Wimbledon final rematch in Dubai as Djokovic pulled out of their World Tennis League match.
"I was pretty excited to play Novak obviously, since the Wimbledon final and all that, wanted to go out there and have some fun with him," said Kyrgios.
"But he's got to look after his body and obviously he's got a big couple of months coming up with a lot of expectations, so I wasn't surprised if he wasn't feeling 100 percent to get out there."
There have been concerns about the health of the World No 1 after he became visibly wobbly on his feet during his Paris Masters run.
Djokovic is likely taking a safety first approach ahead of the season and he is expected to take a full part in the Australian Open season from Adelaide onwards.
"Novak Djokovic announced that he would not be partaking in the World Tennis League event tonight due to not feeling 100 per cent well enough to play," read a statement released by the WTL regarding the Serbian.
Kyrgios is a week out from the start to his competitive season. He is looking forward to taking part in the United Cup mixed team tournament sanctioned by the WTA and the ATP.
"I don't play so much mixed doubles anymore but what I love about mixed doubles is, it's for the fans. That's the most important thing," Kyrgios said of the event.
"Seeing some of the best females in the world playing with the best males, it definitely provides some really good entertainment, how the male kind of lets the female do her thing on the court and not get in the way. That's fun to watch."