Indigenous Australians are living in "appalling" conditions and young Aborigines in detention are "essentially being punished for being poor", the United Nations has declared in a scathing report.

A 15-day tour of Indigenous communities and high-level meetings revealed an "alarming" lack of self-determination, inappropriate housing developments and "deeply disturbing" levels of racism.

The UN's special rapporteur on the rights of indigenous peoples, Victoria Tauli-Corpuz, condemned the "incredibly high" incarceration rate of Aboriginal people as a "major human rights concern".

She was most concerned about the arrest and imprisonment of young Aboriginal people for "petty" offences. In the Northern Territory, 95 per cent of youth detainees are Indigenous.