PRIME Minister Julia Gillard fears "retrograde" steps being taken by state governments are leading to the "rivers of grog" flowing back into indigenous communities in Queensland and the Northern Territory.
Ms Gillard raised the issue during her Closing the Gap statement to the House of Representatives, a report card on the myriad challenges facing Australia's indigenous population.
The report card was mixed, but Ms Gillard said that was to be expected.
"The set-backs that make us aim higher; the successes that make us glad we did," Ms Gillard said.
She confirmed the pledge made five years ago to ensure all four-year-olds in remote indigenous communities would have access to childhood education would be met later this year.
That success needed to be replicated in primary and high school, Ms Gillard said.
She said the number of indigenous people with a Year 12 or equivalent qualification stood at 54% in the 2011 Census - ahead of target and up from 47% in 2006.
But she said when compared to the non-indigenous figure of 86% the magnitude of the task was evident.
Progress was also being made on indigenous infant mortality rates and closing the employment gap, although more work was needed.
In terms of literacy and numeracy Ms Gillard conceded there were some "troubling" statistics.
While there were some positives to be found - like 78% of Year 3 children reaching or exceeding the national benchmark - Ms Gillard said significant disparities remained between indigenous and non-indigenous students.
Ms Gillard said of most concern was the fact Year 3 reading had declined last year after improving between 2008 and 2011.
And in Year 9 writing the gap between indigenous and non-indigenous children was 35%, compared to 16% for Year 3 writing.
On the issue of alcohol management, Ms Gillard threatened her government would "take action" against any policy changes it deemed to be "irresponsible".
She said the task of closing the gap was hard enough without state government "undoing the good work that has already been accomplished".
"This is why I am very concerned about the alcohol policies adopted by the Country Liberal Party since it came to government in the Northern Territory," Ms Gillard said.
"I am concerned about plans touted by the Liberal National Party in Queensland to wind back restrictions in that state, too.
"'Tragedy' was the word Noel Pearson used to describe the Newman government's plans."
Ms Gillard urged the Newman government to exercise "extreme caution" as it reviewed remote alcohol restrictions.
Queensland's Aboriginal and Torres Strait Islander and Multicultural Affairs Minister Glen Elmes accused the Prime Minister of misrepresenting the Newman government's plans.
He said claims by Ms Gillard that the Queensland Government was planning to wind back alcohol restrictions were untrue.
"Playing politics is one thing but misrepresenting the facts is quite another," Mr Elmes said.
"The Newman government is giving Indigenous communities across the State a say in their own future.
"Our approach is to work with these communities individually.
"We will not impose an edict from Brisbane on a community in Cape York or any other place, and neither should the Federal Government."
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