The Federal Government has gone on the attack to sell its plans to abolish the Aboriginal and Torres Strait Islander Commission (ATSIC).

The plan is facing strong opposition from Indigenous Australians.

Prime Minister John Howard says he has never been comfortable with ATSIC, believing it has become more preoccupied with symbolic and rights issues than with helping Indigenous people.

Mr Howard has told Southern Cross Radio the peak Indigenous body has clearly become dysfunctional.

"I don't think the money's been wisely spent," he said.

"I think the culture of favouritism and nepotism that has surrounded that body has become notorious.

"There's no doubt the body has lost the confidence of the Aboriginal community.

The debate now is what replaces it. We don't think there should be another representative body with power to administer funds because I think the same problem will arise."

But Mr Howard's view is not shared by Indigenous leaders like Noel Pearson and Lowitja O'Donohue who have criticised the changes.

Mr Pearson is one of many Indigenous leaders who have described the move as tokenistic and complete folly.

The Federal Indigenous Affairs Minister has also defended the Government's decision.

Senator Amanda Vanstone says bringing ATSIC to an end and appointing a new national Indigenous advisory council will provide better service delivery to Aboriginal Australians.

But Senator Vanstone has seized on other comments by Mr Pearson, which she says back the Government's claim that ATSIC has not worked.

"I don't want to put words in his mouth, but I think you'll agree what he said was they weren't getting good enough people to stand for ATSIC," she said.

"They've had some tremendous commissioners, but they've also had some people about whom you could never possibly give that accolade.

"Equally in the regional council areas I know people who are working really well there, but overall it isn't working."

Despite criticism of the plan by Aboriginal leaders, Senator Vanstone denies it deprives indigenous Australians of elected representation.

"Indigenous Australians vote in elections and they do have elected representation," she said.

"That's their local member and I make an additional point that there was once a country we wouldn't play cricket with because they had separate systems we just wouldn't go and play cricket with them if you recall.

"We think mainstreaming the services that are provided will produce a much much better result."

Senator Vanstone says she will begin negotiations with other parties and the Independents to get the changes through Parliament.

Federal Parliament's only Aboriginal MP has dismissed as "nonsense" comparisons between the ATSIC system and the apartheid era in South Africa.

Aden Ridgeway has joined other Indigenous leaders in criticising the Government's plan to abolish the commission.

The Democrats Senator has taken exception to the comments by Senator Vanstone.

He says the comparison is nonsense.

"The idea of having separate systems isn't so much about creating this dividing line between black and white Australians, it's about building a bridge to make sure that services can be provided and be provided effectively," he said.

In other developments:

Federal Indigenous Affairs Minister Amanda Vanstone says an officer of the Aboriginal and Torres Strait Islander Services (ATSIS) has been suspended without pay over an alleged fraud involving $400,000.

Indigenous groups say it is no surprise the Federal Government has moved to abolish the Aboriginal and Torres Strait Islander Commission (ATSIC).

The Federal Government says it does not expect any jobs will be lost when it abolishes the Aboriginal and Torres Strait Islander Commission (ATSIC).