But a pervasive and longstanding problem of fake arts and crafts is undermining the sector, disrespecting culture and depriving Aboriginal and Torres Strait Islander artists of income, a draft report has found.

In 2019/20 $250 million worth Aboriginal and Torres Strait Islander visual arts and crafts was sold, including almost $47 million in artwork sales and at least $83 million in merchandise and souvenirs.

Yet inauthentic products made up well over half of spending, the Productivity Commission says.

Its report recommends fake "Indigenous-style" products should have mandatory labels to raise consumer awareness about what they are purchasing.

New laws to strengthen Indigenous Cultural and Intellectual Property would also help protect assets, promote respectful collaborations and allow legal action where designs are used without the authorisation.

Extra support for art centres and other services is recommended by the commission, as well as a review of government funding arrangements.

Indigenous Australians Minister Linda Burney says the findings to inform future policy.

"Art ... allows Aboriginal and Torres Strait Islander peoples to share stories, connect to Country, strengthen cultures and communities and to access a range of employment and economic opportunities," she said.

Arts Minister Tony Burke says he's "sick to death" of Indigenous artists getting ripped off.

"Fake art isn't just dishonest - it is cultural theft," he said.

"These fakes undercut legitimate artists and devalue genuine Indigenous cultural expression, robbing First Nations artists of income and business opportunities while also misleading consumers."

A consultation period is open until the end of August, inviting the sector to provide feedback on the recommendations outlined in the draft report.

A final report is due by the end of the year.

Australian Associated Press