The Aboriginal and Torres Strait Islander Social Justice Commissioner, Mick Gooda, who wrote the report, said the gulf between Indigenous and non-Indigenous children continued to grow, with Indigenous children nine times more likely to be in out-of-home care.

"It's so serious we now think it is about almost equivalent to another Stolen Generation," Mr Gooda said.

"What will happen if we continue on this path is in about another 50 or 60 years we will have another person standing up in Parliament and apologising."

Mr Gooda said Indigenous children were being removed from their parents at "alarmingly high rates", making up more than a third of the children, or 14,991, in out-of-home care at June 2014.

The likelihood of Indigenous children coming into contact with the child protection system and being removed from their families, the report said, had increased since the publication of the Bringing Them Home Report on the Stolen Generations more than 18 years ago.

Neglect was the most common reason for removing Indigenous children, accounting for about 40 per cent of all substantiated notifications. Emotional abuse accounted for about 34 per cent of removals, physical abuse for 17 per cent and sexual abuse for 9 per cent.

Mr Gooda said there were circumstances where children had to be removed from their families but there needed to be more efforts to empower Indigenous people to escape the cycle that brings them into contact with the child protection system.

He called on the Federal Government to include child welfare targets in its Closing the Gap strategy, saying it would provide a level of accountability and a means of measuring progress.

Mr Gooda also recommended appointing specialist Aboriginal and Torres Straight Islander children's commissioners in each state and territory and the establishment of an institute of excellence in Indigenous child welfare driven by Indigenous people.

Intergenerational trauma on current generations of Indigenous children was a key reason for entry into the child protection system, he said, and a coherent national healing strategy was needed.

Indigenous Affairs Minister Nigel Scullion said the government would consider the report's recommendations.

The minister said simply setting a child welfare target would not in itself decrease the likelihood of Indigenous children entering the child protection system.

"That is why, along with making communities safer, we have made getting kids to school and adults to work our top priorities in Indigenous affairs," Mr Scullion said.

He said the government was implementing initiatives to directly improve the welfare of Indigenous children, including funding programs that provide early childhood development, care and education to stop child abuse and neglect from occurring.

Mr Gooda also used his 2015 Social Justice and Native Title Report to criticise the government's Healthy Welfare Card - a cashless debit card that restricts spending on gambling or alcohol and will be trialled from next year - and the revamped work-for-the-dole scheme.

Mr Gooda said limiting people's ability to access cash welfare payments would not address the causes of alcoholism, drug use and gambling problems.

Both schemes, he said, would likely have a disproportionate impact on Indigenous communities and could lead to indirect discrimination.

Mr Gooda urged the government to take a "human rights-based approach" and make both schemes voluntary in remote communities.

The report will be launched on Friday.