Indigenous Australians will be asked to develop their own Closing the Gap targets as part of a "refresh" announced by the Prime Minister.
Indigenous Australians will play a greater role in efforts to close the health and education gap.
Prime Minister Scott Morrison delivered the 11th annual Closing the Gap report in Canberra on Thursday, calling for a new approach as the targets had been "set up to fail".
Just two of the seven Closing the Gap targets are on track to be met, more than a decade after the original report.
"While it was guided by the best of intentions, the process has reflected something of what I believe is the hubris of this place - it did not truly seek to partner with Aboriginal and Torres Strait Islander peoples," he said.
The report shows efforts to get more Indigenous children into early education are on track, but improvements to life expectancy, infant mortality and employment rates are not.
The targets need to be revised to make states and territories more accountable and give indigenous Australians more say, Mr Morrison says.
The prime minister says the current method of measuring targets actually masks progress, discouraging further efforts.
For instance, child mortality among Indigenous Australians has decreased 10 per cent since 2008. But the target is not on track because the non-Indigenous figure has declined at a faster rate.
The "refresh" of the Closing the Gap targets, initially set out in 2016, will ask Indigenous Australians to develop their own.
"Governments fail when accountabilities are unclear, when investment is poorly targeted, when systems aren't integrated and when we don't learn from evidence," he told the Parliament.
Mr Morrison said the process will be subject to regular independent Indigenous-led reviews.
HECs relief for teachers
Mr Morrison said that to encourage progress on the education target, the federal government will be scrapping the HECS debt for teachers working in remote Indigenous communities for four years.
The idea was first suggested by Tony Abbott in his role as Indigenous envoy.
"I want to get kids into school and I want them to stay in school for longer. That is what I wish to achieve. Education is the key to skills. It is the key to jobs," Mr Morrison said.
"If you're a teacher in a very remote area, what you are doing is more than a job - it's a calling. It's an act and expression of love for your fellow Australians. And we should never take advantage of that great act of love."
He said the HECS debt of teachers in remote Indigenous communities will be frozen from today.
Shorten reaffirms vow to hold referendum on Indigenous recognition
Opposition leader Bill Shorten said he welcomed the government's plan to refresh the approach to the Closing the Gap targets.
“After a decade of good intentions, tens of thousands of well-meaning, well-crafted and well-intentioned words, heart-felt words, from five Prime Ministers, we assemble here and we see that not enough has changed,” Mr Shorten said.
"If we seek to see real change in the lives of our First Australian people, then we need change our approach, change our policies … and let First Nations have real control in how decisions are made."
The Labor leader said if his party is elected to government, a priority will be a referendum on Indigenous constitutional recognition.
"To those who dismiss constitutional recognition as symbolism or identity politics, perhaps unwittingly that final phrase is the closest to the truth because enshrining a voice in the constitution is most certainly about identity. It's about our national identity," he said.
"Are we a people who can recognise our First Australians in our constitution as part of our national identity? Are we big enough? Are we brave enough?"
Closing the gap targets
- Early education: 95 per cent of all Indigenous four-year-olds enrolled in early childhood education by 2025. On track
- Year 12 attainment: Halve the gap in Year 12 attainment by 2020. On track
- Life expectancy: Close the gap in life expectancy between indigenous and non-Indigenous Australians within a generation by 2031. Not on track
- Child mortality rates: To halve the gap in mortality rates for indigenous children under five within a decade, by 2018. Not on track
- Employment: Halve the gap in employment by 2018. Not on track
- Reading and Numeracy: Halve the gap in reading and numeracy for Indigenous Not on track
- School attendance: Close the gap in school attendance within five years, by 2018. Not on track
Additional reporting: AAP