The proportion of Aboriginal and Torres Strait Islanders in NSW youth detention centres had decreased from 52 per cent in 2017 to 40 per cent in 2021.
Now half the people detained in NSW youth detention centres are Indigenous.
It had been rising since April when bail refusals also began increasing, a senior official told a parliamentary budget estimates hearing on Tuesday.
"It's clear Aboriginal people have been disproportionably impacted by the bail refusals," said Paul O'Reilly, the state's most senior official for youth justice.
"It is shameful to have that level of over-representation in custody."
Indigenous people make up 3.4 per cent of the NSW population and six per cent of those are under 25.
Since June, about 480 children have been refused bail by police and then released by a magistrate.
That could be due to the court being provided with more or different information than what was available for police after-hours, Mr O'Reilly said.
Some police commands keen on reducing the figures are working with the justice department to pilot bail support programs.
The department's deputy secretary for transforming Aboriginal outcomes, Brendan Thomas, said such programs focused on limiting the number of bail conditions to increase compliance, or work with Aboriginal community leaders on the most appropriate conditions for each accused person.
The problem was really around remand, with the proportion of Aboriginal young people serving a sentence sitting at 28 per cent, he said.
"That has significantly reduced ... over a number of years," he said.
As of Tuesday, 205 young people were being held in detention facilities - about the average figure for the year to June 2021 - and down on the 2017/18 average of 286.
Seventeen detainees were female and nine were under 14, including one 11-year-old child.
Some 849 people under 18 are on community orders, requiring some form of supervision by the justice department.
Families and Communities Minister Natasha Maclaren-Jones said the government had several projects to address youth crime.
"A lot of the key work we're doing is ... on that early intervention, supporting young people so they're not going into correction centres," she said.
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