Aboriginal organisations have welcomed the opportunity to gain influence on Closing the Gap.
The initiative, which began in 2008, was designed to improve the lives of Indigenous Australians through annual tracking of seven targets.
Despite some positive progress since it began, those goals have often not been met.
Scott Morrison told parliament on Thursday that key measures - including life expectancy, infant mortality and employment rates - were not on track.
The prime minister said the policy framework was flawed, the targets should be revised and Indigenous Australians given more say.
"It was set up to fail,” he said.
“This was not a true partnership — not with the states and territories, or with Indigenous peoples themselves."
Last year, a coalition of experts known as the Close the Gap campaign said Canberra had not made "real inroads" since the strategy began.
As part of a “refresh”, the Council of Australian Governments (COAG) committed to forming “a genuine formal partnership” with Indigenous Australians. Those arrangements will be settled within the next two weeks and new targets finalised later this year.
After years of lobbying for change, the mood is buoyant among Aboriginal peak organisations.
Pat Turner, CEO of the National Aboriginal Community Controlled Health Organisation (NACCHO), has welcomed the government’s shift in direction.
“I’m feeling much more comfortable about the 'refresh' process with the direct involvement with Aboriginal people that can offer a great deal of expertise,” she told NITV.
“I’m glad that the prime minister referred to the partnership of the coalition of peaks moving forward and that he wants the work to proceed in a very committed and professional matter.”
John Paterson, CEO of the Aboriginal Medical Services Alliances Northern Territory (AMSANT), hopes underlying issues are addressed.
“Everything stems back to what we refer to as social determinants of health,” he said.
“If you don’t address them in parallel, we will unfortunately be in this place in five years’ time.”
Antoinette Braybrook, CEO of the Aboriginal Family Violence Prevention and Legal Service Victoria (FVPLS Victoria), expressed optimism about the future.
“I was pleased to see the PM and the leader of the opposition’s commitment to Closing the Gap,” she said.
“What I’m looking forward to is getting this partnership agreement signed by the end of February.”
“Then we start the real work.”