Billed as the most comprehensive assessment of Aboriginal and Torres Strait Islander wellbeing ever produced in Australia, the Productivity Commission report highlights an alarming worsening in justice and mental health outcomes.
It shows the proportion of Indigenous Australian adults reporting substance misuse has risen to 31 per cent.
The hospitalisation rate for self-harm is up 56 per cent over the past decade.
And the report cites a 77 per cent surge in the adult Indigenous imprisonment rate in the past 15 years.
Law Council of Australia president Stuart Clark says Australia should be abolishing mandatory sentencing.
"It is ridiculous to send somebody to prison for three offences perhaps committed on the same day. We should stop sending people to prison, particularly Indigenous people to prison, simply because they can't pay a fine."
Opposition Leader Bill Shorten says the Federal Government needs to do more to address Indigenous disadvantage.
"The progress under this Liberal Government has been too slow in closing the gap. Let's be clear, the numbers are all headed in the wrong direction. Mr Turnbull needs to give more attention to our First Australians."
The report points to a failure of policy and oversight.
The Productivity Commission estimates authorities have robustly evaluated only 34 out of a thousand Indigenous policies and programs.
The chairman of the Prime Minister's Indigenous Advisory Council, Warren Mundine, says it is disgraceful so few programs are properly assessed.
"It's actually a bit disgraceful. We've got to really start making sure that all programs are evaluated, that all programs have measurable outcomes and people are heading to those outcomes, because we cannot keep on funding organisations that are not achieving."
The co-chairman of the National Congress of Australia's First Peoples, Rod Little, says it is time for the government to wake up and act.
"This report is a stark reminder that there have been failings in government's attempts to correct the status of Aboriginal and Torres Strait Islander affairs."
There have been improvements in some areas, including mortality rates for children as well as employment and education outcomes.
The chief executive of the Australian Research Alliance for Children and Youth, Stephen Bartos, says he sees some good news for young people.
"There are more Indigenous kids seeing school through to Year 12. And that's good, because it means they've got a better education, it means they've got better chances for jobs and a more satisfying life."
There has been no change in rates of family violence.
Indigenous professor Marcia Langton is one of three Indigenous women who have now called for a national task force to fight the problem.
"We also want more support for the victims, who are routinely ignored in the urban, fashionable rush to perpetrate our behavioural change programs."
All governments are being urged to work together in addressing the issues for Indigenous Australia.
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