The Australian government has commissioned the Productivity Commission to conduct a comprehensive review of funding associated with the Closing the Gap national agreement, aimed at reducing Indigenous disadvantage. The announcement was made on Friday by Treasurer Jim Chalmers and Indigenous Australians Minister Malarndirri McCarthy, who emphasized the review’s focus on the effectiveness of both dedicated Indigenous funding and mainstream government expenditures.

The review seeks to evaluate whether resources, including those allocated to Aboriginal community-controlled organisations (ACCOs), are being utilised efficiently. ACCOs provide vital services such as remote healthcare and are governed by elected boards, distinguishing them from privately owned providers. The government’s move follows critical findings from a previous Productivity Commission report two years ago, which highlighted that despite commitments and Commonwealth funding, many state and territory governments continued business as usual without significant progress.

The review comes amid concerning data from the most recent Closing the Gap update released in August. It revealed widening disparities between Indigenous Australians and the broader population in several key areas: a decline in the proportion of Indigenous children developmentally ready for Year 1, increasing rates of Indigenous adult imprisonment, rising numbers of Indigenous children in out-of-home care, and a climbing Indigenous suicide rate. Of the 19 targets set under the decade-long agreement, only one—near-universal preschool enrolment among Indigenous five-year-olds—has been met.

These findings coincide with nationwide scrutiny of child protection systems, which have been criticised for inadequately safeguarding vulnerable Indigenous children. Indigenous children represent 7 percent of Australia’s youth but make up 44 percent of those in out-of-home care, underscoring systemic challenges.

The Productivity Commission has previously attributed limited progress to entrenched bureaucratic inertia and a lack of accountability mechanisms. It has recommended establishing independent watchdogs to oversee government agencies’ adherence to Closing the Gap commitments. To date, only the Australian Capital Territory and Victoria have implemented such bodies.

Data gaps remain a significant barrier to assessing progress. For example, no national measure currently exists for family violence, despite it being a critical issue. The Closing the Gap agreement includes a commitment from governments and the Coalition of Peaks—a national body representing Aboriginal service providers—to improve data collection and reliability to support evidence-based policymaking.

Senator McCarthy stressed that Closing the Gap offers a framework for change and that efforts are being made to build on successful initiatives. The review launches a year after an independent report led by the Coalition of Peaks concluded that while the agreement's design was sound, governments had not fully implemented its provisions.

Donnella Mills, lead convener of the Coalition of Peaks, acknowledged positive results where governments had established genuine partnerships with Aboriginal service providers. She stressed the necessity for all governments to lead transformative change in critical sectors such as health, housing, education, employment, and justice to achieve meaningful progress.