Former prime minister, Malcolm Fraser has used National Sorry Day to hit out at Australia's treatment of Aborigines.

Speaking at a panel discussion in Melbourne, Mr Fraser said the Federal Government is trailing behind countries such as New Zealand in addressing the reconciliation process.

He has warned that Australia must right the wrongs of past policies or face the consequences.

"We ignore out our peril the disillusion, the despair and anger in many Aboriginal communities," he said.

"That anger is often turned inwards and tragically many Aboriginal people are destroying themselves through addiction or suicide.

"If we let this situation fester sooner or later that anger will spill out beyond the Aboriginal community and we'll all pay a heavy price," Mr Fraser said.