Indigenous legal aid to be cut by $13.4 million

Indigenous legal aid is set to take the biggest cut in funding to Indigenous services, the budget update has revealed.

The biggest blow to Indigenous funding was to legal aid - $13.4 million will be taken out of the sector over the next four years.

But the treasurer says it is part of returning the budget to good health.

"Much of the projected growth is from social programs, including welfare, education and health. Spending reform will inevitably require difficult choices about the policies that Australia needs now and in the years to come," Treasurer Joe Hockey says.

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The federal government says the cuts will only apply to the policy reform and advocacy arms but during Senate Estimates the Attorney General's Department confirmed there was no way they would know just how it would affect frontline services.

Those services include the $45 million that was promised during the election campaign to set up four training centres that the goverment is hoping will train 5,000 Indigenous people.

Another campaign promise was constitutional recognition within the first term. But the money that it costs to hold a referendum isn't in the outlook, although the Finance Minister says it is accounted for.

"Most of the commitments where further detailed work is yet to be undertaken are provided for in the contigency reserve, and of course as that detail is finalised we will be making further announcements," Finance Minister Mathias Cormann says.

There has also been $28 million allocated to the remote school attendance strategy starting next term - that money will be shuffled out of other programs.

And in Native Title, just over $2 million has been promised to assist landowners who could be affected by claims put in by Indigenous Australians.

'More Indigenous Aussies will end up in jail without legal aid'

Cutting Aboriginal legal aid will further entrench Aborigines and Torres Strait Islanders as second-class citizens in their own country, a legal body says.

The Abbott Government is set to announce the cutting funding of the National Aboriginal and Torres Strait Islander Legal Services (NATSILS), and of all law reform and policy officer positions within each state and territory to make an annual saving of $3 million for the next three years.

At a time when Indigenous incarceration rates are alarmingly high and rising, cutting the funding such services is short-sighted, says NATSILS chairman Shane Duffy.

"More people are going to end up in prison, it's as simple as that," he said.

"Justice-related costs are spiralling out of control around Australia, and removing the ability of front-line services to provide government agencies with accurate policy advice will only serve to make our system more ineffective, inefficient and increasingly costly."

Watch: Indigenous service providers react to budget cuts

The money saved will be a fraction of the damage done to Aboriginal families by neutering the legal peak body that represents them, said Gary Highland, national director of Australians for Native Title and Reconciliation (ANTaR).

Aboriginal people are 18 times more likely to be imprisoned than other Australians, which is a major factor preventing participation in the workforce, he said.

"We won't give Aboriginal children a good education, while they are 25 times more likely to be incarcerated than other Australian children," he said.