A new study illustrates the extremely low rates of literacy in Australia's remote Indigenous communities.

The Fred Hollows Foundation has examined the literacy and numeracy of children at Wugularr, south-east of Katherine in the Northern Territory.

In 2002, not one child at Wugularr had reached the national reading benchmarks for years three and five.

The report says nationally only 15 per cent of remote Indigenous students achieved the required literacy levels, compared to about 90 per cent of the broader population.

The foundation's acting manager, Peter Holt, says poor health and lack of English are major barriers to Indigenous schooling but governments are also to blame.

"I was actually surprised with Manyallaluk school that people took the attitude that it was actually up to the community to prove that they were interested in education before any services were provided to their kids," he said.

"My feeling from the rest of society is that education is compulsory till you're 15 and really it's up to the government to provide the resources for that to happen."