As the commission switched its focus on Tuesday to the experience of Aboriginal and Torres Straight Islander children in out of home care, it was revealed that the placement of Aboriginal children in care is being determined by "expedience" rather than welfare considerations.

Jim Morrison from the National Stolen Generations Alliance told the commission said he had been told "horrifying" stories of Aboriginal children being placed with drug dealers who effectively held the child's biological parents to ransom.

"It was a demand of parents – 'you can see the child but you are going to have to pay'," said Mr Morrison, the alliance's national community engagement manager.

Later Mr Morrison told Fairfax Media that the children were ending up in the middle of "criminal activity" because government departments were failing to investigate their carers properly.

"Then, the parent who's just gone through rehab so that she could see her children is being told, 'Well, that's going to cost you, we need money,' " Mr Morrison said.

"The young parent then has to resort to other activity which is probably criminal activity. I'm hearing that [this is happening] quite a bit."

Senior officers from other Aboriginal organisations involved in out of home care said that government departments across the country were simply focused more on "bums on beds".

Dana Clarke, the chairwoman of a NSW Aboriginal care organisation, said this attitude extended to kinship placements.

"Quite often kinship placements … aren't safe," Ms Clarke said.

"Initially you want the children to go to family but they have to be suitable family. They have to be with safe adults, but quite often family sits in front of safety."

Ms Clarke also told the Commission that in NSW the Aboriginal Placement Principles – according to which Aboriginal children should be placed with members of their own community – was not being adhered to.

"Quite often there is a tick and flick kind of attitude to the principles," she said, adding that there were "no ramifications" for those who ignored the principles.

Later Mr Morrison suggested a radical solution in which Aboriginal children would be placed in "missions" with their parents in order to re-learn their culture.

"There are six or seven missions in south-western Australia that aren't being used," Mr Morrison told Fairfax Media.

"Lets reclaim those missions to put our kids back in there but under our terms.

"Sure it might be [seen as] another stolen generation, but this time it's our way of doing things. We have to seize the devil by the throat so those kids can learn their own culture."