Wiradjuri elder Flo Grant, from Wagga Wagga in southern NSW, says the Federal Government's proposed welfare reforms for Indigenous people are a step backwards for Aboriginal relations.

The Government announced yesterday it is looking to move away from passive welfare to a system of mutual obligation, where positive social behaviour would be rewarded with welfare payments and other incentives.

Ms Grant says Aboriginal communities are not alone in experiencing social problems.

"This is mission mentality," she said.

"This is back to when the police were policing our missions, we had managers that curfewed the movements of our people."