ONE of Australia's leading Catholics has questioned the child welfare policies of state governments, claiming at-risk Aboriginal children are often being placed with relatives, some of whom were dysfunctional themselves and ill-equipped to care for the youngsters.

The Catholic Archbishop of Perth Barry Hickey said child protection workers did not appear to be applying the same stringent standards to indigenous children as they used when placing non-Aboriginal children in foster homes in Western Australia.

"There is a suspicion that the bar is being lowered," he said.

The archbishop was commenting on the case, reported by The Australian, of a foster carer who admits socialising at a brothel and who is to be handed back her four indigenous step-grandchildren, aged two to 13.

"The connection with the brothel would not have been permitted in a non-Aboriginal placement," Archbishop Hickey said. "It must be asked whether the present placement is the best for these children."

In January, the department's child advocate received similar warnings about the same foster carer. But the department's own interim investigation, released to The Australian last week, has found the woman goes to the casino as a recreation and goes to the brothel to socialise.

Though the department's investigators had not interviewed the trainee prison officer who made the allegations about the foster carer, director-general Terry Murphy said the children would be returned to her.

The Barnett Government's review into indigenous child placement is due to report at the end of the month.

Mr Murphy has acknowledged that the policy raised concerns as it encouraged workers to place Aboriginal children with immediate or extended family "even when that family itself may be struggling".

Archbishop Hickey, a trained social worker who set up the Catholic Church's Centrecare welfare network in Western Australia, said Aboriginal families in crisis knocked almost daily on the door of his inner-city home.

"I had seven people last night sleeping in my backyard, all addicts because of unfortunate events in their child-rearing. They are either angry towards their (absent) fathers, or they don't know who he was," he said.

"We are faced with a massive threat to the future of our children today, the tip of it being the numbers in foster care."

Western Australia's child protection department relies heavily on relatives or indigenous carers to take in Aboriginal children removed from home, with 82 per cent of all Aboriginal wards placed with kin or indigenous carers. Archbishop Hickey said such emphasis was misplaced, and -- where foster families were dysfunctional -- could lead to a repeat of the Stolen Generations.

"If children are not going to a healthy, functioning (foster) family, the consequence is that they will pass on the gaps and disadvantages to their children.

"We almost have a situation in which we're repeating history."

He called for a return to greater reliance on the use of cottage homes for Aboriginal wards of the state, a semi-permanent arrangement in which a paid foster carer -- often an indigenous person -- looked after up to six children.

"It's a more stable setting, with more time and space for intervention to help children with emotional problems, for working with the birth families and finding alternatives to outside care.

"They add a stability often lacking in foster care now, because an unfortunate number of placements don't work."

He denied that this would be a return to Aboriginal state wards.

"Having children live in group houses, in an ordinary suburban street and going to the local school, is very different from the old institutions," he said.

[This page was added on 29 January 2013.]