The Australian government has rejected a multi-million dollar compensation demand for Aboriginal children taken from their families, known as the 'stolen generation'.
Kevin Rudd, the Australia prime minister, is preparing a national apology to Aborigines to be delivered when parliament resumes next month.
But on Monday his government said it would not pay compensation and will instead offer enhanced welfare provisions.
Aboriginal leaders had demanded $869m in reparations for thousands of Aboriginal children who were forcibly placed in orphanages or foster care between 1870 and 1967, purportedly to improve their assimilation with white Australia.
"The apology is to provide a bridge of respect between indigenous and non-indigenous Australians"
Jenny Macklin, Australian minister
A 1997 report on the stolen generation recommended reparations but the government said it prefers to provide enhanced welfare measures to lift health and education standards for Australia's native communities.
Rudd's conservative predecessor, John Howard, had refused to apologise for fear of opening the door to compensation claims.
However in 1999, under growing public pressure, Howard drafted a motion expressing "deep and sincere regret" over the issue and called the stolen generation "the most blemished chapter" in Australia's history.
On Monday Jenny Macklin, the indigenous affairs minister, said the way forward was to tackle the prevailing problems in the community, such as the massive gap in life expectancy between Aborigines and the rest of Australia.
"The point of the national apology really is to provide a bridge of respect between indigenous and non-indigenous Australians," she told Sky News Australia.
Aborigines are Australia's most disadvantaged group with many living in third world conditions in the country's remote outback settlements.
Until 1967 Aborigines were not counted in national census figures and were governed under Australian flora and fauna laws.
'Act of genocide'
Lyn Austin, head of advocacy group Stolen Generations based in the state of Victoria, said victims of crimes were entitled to compensation.
"You are looking at the gross violation and the act of genocide and all the inhumane things that have happened to our people," she told local radio.
In 1997, the report "Bringing Them Home" found thousands of aboriginal children had been forcibly placed in orphanages or foster care and revealed that many were brutalised or abused with harsh punishment for speaking in indigenous languages instead of English.
Michael Schaeffer, lawyer for Stolen Generation, said indigenous children should take the fight for compensation from the government to the courts.
"I would urge any prospective litigant who feels that they have a complaint to make in relation to removal as a child to seek legal advice."