Almost half of these Indigenous children - 47 per cent - were placed with relatives in 2023/24, representing a slight improvement on the 45 per cent shown in Australian Institute of Health and Welfare data for 2019/20.
This rate remains unacceptably low for Catherine Liddle, chief executive of peak body for Indigenous children SNAICC.
She says it shows the Aboriginal and Torres Strait Islander Child Placement Principle, which was designed to reduce over-representation in the child protection system, is not being fully respected or implemented.
"These aren't just numbers, that statistic represents thousands of children's lives and this system is failing them," Ms Liddle said.
"We know when children are able to maintain family and cultural connections they have better outcomes in health and education, interrupting the trajectory between child protection and juvenile justice systems."
Each state and territory has legislation prioritising placement of Indigenous kids with Aboriginal and Torres Strait Islander relatives, and Ms Liddle urged them to increase efforts to uphold these frameworks.
"Governments and child protection systems need to get serious about the commitments that they have made because the efforts being made now simply aren't enough," she said.
Between 2020 and 2024 the number of Indigenous children in out-of-home care increased from 18,900 to 20,000.
In 2024, the rate of First Nations kids in out-of-home care was 11 times higher than their non-Indigenous peers.
The data also revealed an "underwhelming effort" from child protection systems to reunite children with families, Ms Liddle said.
Just over one-third of First Nations children leaving out-of-home care in 2023/24 were reunified with family.
Four in five who were reunited with their family in the previous financial year did not return to out-of-home care in 2023/24.
The most common reason children came into contact with child protection systems was emotional abuse.
This is often linked to exposure to family and domestic violence, Ms Liddle said.
"When emotional abuse is the leading reason for intervention, we must recognise what that really means - children are being removed because of the violence experienced by their mothers, aunties and grandmothers," Ms Liddle said.
"This reinforces the urgency of Aboriginal and Torres Strait Islander-led solutions to end family violence and increase early intervention services to protect our families."
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