Indigenous Australians will play a greater role in efforts to close the health and education gap.
Prime Minister Scott Morrison delivered the 11th annual Closing the Gap report in Canberra on Thursday, calling for a new approach to targets that had been "set up to fail".
Just two of the seven Closing the Gap targets are on track to be met, more than a decade after the original report.
"While it was guided by the best of intentions, the process has reflected something of what I believe is the hubris of this place - it did not truly seek to partner with Aboriginal and Torres Strait Islander peoples," he said.
The report shows efforts to get more indigenous children into early education are on track, but improvements to life expectancy, infant mortality and employment rates are not.
The targets need to be revised to make states and territories more accountable and give indigenous Australians more say, Mr Morrison says.
The prime minister says the current method of measuring targets actually masks progress, discouraging further efforts.
For instance, child mortality among indigenous Australians has decreased by 10 per cent since 2008. But the target is not on track because the non-indigenous figure has declined at a faster rate.
The "refresh" of the Closing the Gap targets, initially set out in 2016, will ask indigenous Australians to develop their own.
There will also be a renewed focus on education.
"So that the next generation of indigenous men and women will have every opportunity to participate in and contribute to our economic prosperity," Mr Morrison said.
Teachers who work in very remote areas for four years will have their university debts cancelled in a bid to lift indigenous education standards.
Opposition Leader Bill Shorten welcomed the changes, saying there needs to be a greater partnership with Aboriginal Australians.
But he said the issue was frustrating as despite there being good intentions, little progress has been made.
"It's not just the gap in life expectancy or health or educational results or employment opportunities, but the gap between words and actions, the gap between promises and results," he said.
The opposition leader reiterated that, if successful at the next election, Labor would hold a referendum on having an indigenous voice in parliament.
The changes to Closing the Gap will also hold different levels of government to account and include new priorities on housing, employment, family violence and land and water rights.
State governments will be obliged to make annual public statements on the areas they are responsible for, such as health and education.
The draft targets include an effort to reduce the rate of Aboriginal and Torres Strait Islander young people in detention by 11 to 19 per cent, and adults held in incarceration by at least five per cent by 2028.
Australian Associated Press