Aden Ridgeway, the sole Aboriginal member of the national parliament, said anger over the lack of progress in narrowing the social division between black and white Australians over the past decade was growing, creating potential hotbeds of violence.
This flared up on Sunday night when about 100 Aborigines, angry about the death of 17-year-old Aboriginal Thomas Hickey, pelted 200 riot police with Molotov cocktails, stones and bottles, in the worst civil unrest in Sydney in over a decade.
"There's been simmering tension building up in communities ... and Thomas Hickey's death became the trigger point for this stress and anxiety to be expressed in such an
extreme way," Ridgeway said.
"This isn't being harnessed by any particular political movement but instead you have young people feeling a sense of hopelessness and despair about life's opportunities."
Australia's 400,000 Aborignes and Torres Strait Islanders, who make up 2% of the continent's 20 million population, remain the nation's most disadvantaged group despite government funding of more than A$1 billion ($787 million) a year.
Many Aborigines live below the poverty line, dying 20 years younger than other Australians and with far higher rates of imprisonment, unemployment, welfare dependency and alcoholism.
"If the inquest comes up with a report that doesn't satisfy demands about getting answers, it is more than likely you will end up with another outbreak of violence"
member of parliament
In addition, victims of the so-called "Stolen Generation" still suffer mental scars from the seizure of up to 100,000 Aboriginal children, including Ridgeway's father.
They were taken from their parents between 1910 and 1970 to be assimilated into white culture.
Ridgeway said anger was growing over the lack of commitment to address social problems and a refusal by the government to apologise for past injustices inflicted on the nation's original inhabitants in the 216 years since British colonisation.
Instead, the conservative government has adopted a pragmatic approach to racial reconciliation, using the army to build housing for outback Aboriginal communities.
Ridgeway said this feeling of alienation had been exacerbated by a dramatic shift in the profile of the indigenous population, with about 70% of Australia's blacks now aged under 25.
He called for an independent, far-reaching inquiry to look at the social needs of Aborigines and not just the circumstances of Hickey's death.
"If the inquest comes up with a report that doesn't satisfy demands about getting answers, it is more than likely you will end up with another outbreak of violence," he said.