A scathing report from the NSW Auditor-General made that finding while probing the efficiency of custodial and post-release services designed to reduce Indigenous people reoffending.
Under national Closing the Gap targets set in 2020, states and territories aim to reduce the rate of Indigenous Australians held in custody by 15 per cent by 2031, and Indigenous juveniles by 30 per cent in the same time frame.
But NSW figures have worsened, and the target is unlikely to be achieved.
The auditor-general found inmate security classification processes were not fit for purpose regarding Indigenous people, restricting their ability to access rehabilitation tools like education, vocational training, employment and work release.
The system used to rank reoffending was not designed with First Nations stakeholders and disproportionately assessed Indigenous youth as high-risk, the report found.
"This is not due to a higher propensity for crime," the report said.
"But rather (it is) due to increased exposure to social inequality, which increases the risk rating.
"(It limits) their access to programs that support reintegration, and exposes them to institutional barriers that contribute to cycles of incarceration."
The scathing report found Corrective Services NSW and Youth Justice NSW had not appropriately tailored post-release support to ensure Indigenous people access culturally appropriate assistance.
The agencies have had five different strategies targeting Indigenous over-representation in custody since 2019, but have not tracked spending or outcomes, and they did not hit their targets.
NSW Auditor‑General Bola Oyetunji delivered a damning assessment of their efforts to transform the system.
"The activities undertaken by Corrective Services and Youth Justice have had little to no impact on the rates of reoffending among First Nations peoples, nor alleviated pressure on an already overburdened justice system," the report said.
More than 60 per cent of Indigenous adults released from custody reoffended within a year, compared with 42 per cent of non-Indigenous adults.
In the same 2023 data, more than 70 per cent of Indigenous youth released from custody reoffended within a year, compared with 49 per cent of non-Indigenous youth.
Australia recorded 33 Indigenous deaths in custody in 2024/25, the largest number since record-keeping began in 1979/80.
NSW Aboriginal Affairs Minister David Harris referred questions about the report to the state attorney-general.
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