First Nations children are paying the price for government inactivity, the peak body for Indigenous children and young people has said.

The latest data from the Australian Institute of Health and Welfare (AIHW) revealed only one-third of Indigenous children are developmentally on track, governments across the country have continued to exacerbate the levels of children in custody, and Indigenous children in child protection continues to rise.

SNAICC Chief Executive, Catherine Liddle, said Australian governments needed to uphold their end of the National Agreement to Closing the Gap.

"This update from the AIHW is the latest in a string of reports showing that governments have largely failed to fulfil their commitments under the National Agreement, highlighting a lack of fundamental change and the persistence of "business-as-usual" approaches," Ms. Liddle said.

Whilst the federal government has committed to closing the gap, including by investing significant funds into remote communities, criticism has been levelled at an inability to pull more levers to prevent states and territories from enacting policies which experts say deliberately harm Indigenous children.

These include proposals to allow judges to circumnavigate the child placement principle, lowering the age of criminal responsibility and the tightening of bail laws.

The treatment of people in prison - especially First Nations inmates - has continued to be highly criticised by human rights, legal and Indigenous campaigners. There have been at least 587 Indigenous deaths in custody since 1991.

Despite condemnation from experts, children are often incarcerated in adult facilities.

The latest figures from the Productivity Commission revealed 23,956 First Nations children were in at least one out-of-home care (OOHC) placement in 2023-24—over 43 per cent of all children Australia-wide.

Nationally, Indigenous children aged 0-17 were placed at least once in OOHC in the last financial year at a rate of 60.6 per 1,000, 10.4 times higher than non-Indigenous children and a slight increase from 12 months previous.

In Victoria, Indigenous children were placed at least once in OOHC throughout 2023-24 at a rate of 113.9 per 1,000 children—the highest in the country and more than 18 times that of non-Indigenous children.

Only 34 per cent of Aboriginal and Torres Strait Islander children were assessed as being developmentally on track compared with 56 per cent of non-Indigenous children.

Ms Liddle said this data was not a failure of the National Agreement or the Aboriginal community-controlled organisations (ACCO). Rather, she argued it was Indigenous-led organisations leading the charge in enacting positive changes in the sector.

She said whilst SNAICC were happy to see Target 3 surrounding preschool enrolments on track, "the fact our children are not developmentally ready for school shows there is more work to be done".

"This becomes increasingly important when we consider the whole lifespan of our children, with studies showing that early childhood education and care interventions are key to reducing the rate of juvenile offending and increasing evidence on the crossover of children entering OOHC and being involved with the juvenile justice system," Ms Liddle said.

Speaking this week, chief executive of the National Aboriginal Community Controlled Health Organisations (NACCHO), Pat Turner, said "state and territory governments need to start pulling their weight" when it came to Closing the Gap, and Ms Liddle agreed.

She argued the blame in Closing the Gap targets not being met lay at the feet of governments and their "backseat approach," which was only "delaying the critical changes which need to happen across the board to see improvements…".

"To close the gap, governments must honour their commitments and empower Aboriginal-led solutions to drive policy reform and service delivery," Ms Liddle said.

"Without urgent change, the cycle of disadvantage will continue."