The number of young people coming into contact with the criminal justice system has fallen in the past five years.
However, Aboriginal and Torres Strait Islander children continue to be over-represented under youth justice supervision in every state and territory, according to data released by the Australian Institute of Health and Welfare.
Indigenous people aged 10-17 are about 24 times more likely to be in detention than other young people.
On an average day in 2021-22, almost two-thirds (60 per cent) of people aged 10-17 in detention were Indigenous compared with almost one-third (32 per cent) of adults in prison, the report found.
Palawa elder and Amnesty International Australia Indigenous advisor Rodney Dillon said the underlying causes of poverty and inequality needed to be addressed.
"We need to have kids medically assessed before they go in or before they're even taken to court," he said.
"We're not doing that. We're just locking them up.
"And then we put them in solitary confinement and supercharge them and send them back to the community."
Between 2017-18 and 2021-22, the rate of Indigenous people aged 10-17 in detention fell from 33 to 28 per 10,000, while the non-Indigenous rate decreased from 1.5 to 1.2 per 10,000.
Two-thirds of all children under youth justice supervision in 2021-22 had been supervised in a previous year.
Arrernte/Luritja woman Catherine Liddle is the CEO of SNAICC - National Voice for our Children, the peak body that represents Indigenous children in out-of-home care.
Ms Liddle said research has consistently shown Indigenous children were more likely than other Australian children to be in out-of-home care, which is a major contributing factor to coming into contact with the criminal justice system.
"What we need to do is be putting the dollars into early intervention and looking at ways that we strengthen families so that children don't hit child protection systems, but rather have the supports that they and their families need," she said.
"We want healthy children who can stay connected to their family, to their cultures and their communities - and that's the only way to stop this type of trajectory."
Mr Dillon said bad laws made in a hurry often had a lifelong effect on children.
"That's always a problem when there's a knee-jerk reaction to one crime," he said.
"We need to stop crime, not glorifying it and making it worse.
"So we need to look at what's causing the crime and address those issues in each state, and those politicians that are lazy - who just want to increase the penalties.
"It's not very smart politics. It's short-term votes for a long-term problem."
On average, Indigenous children entered youth justice supervision at a younger age than non-Indigenous young people.
Ms Liddle said the most recent agreement on Closing the Gap included a target to reduce the number of Indigenous children in detention by at least 30 per cent by 2030.
"The Closing the Gap agreement is about systemic and structural reform," she said.
"We can't keep tinkering around the edges on this.
"The reason it keeps happening is because the system was built to do it.
"The investment goes into child removals instead of early intervention.
"So until we start getting that structural reform that the overarching agreement on Closing the Gap articulates and commits all governments to, we're not going to start seeing the shift in the outcomes for our children."
