Department of Justice and Community Safety secretary Kate Houghton on Tuesday admitted the government knew the state's 2018 bail crackdown would adversely affect Aboriginal people.
She agreed it also had to be aware that changes resulting in an increase in the number of Aboriginal people in prison equated to a rise in the number of deaths in custody.
Since a 1991 royal commission, 23 Aboriginal people have died in Victorian prisons and 10 have died in police custody and related operations, Ms Houghton told the Yoorrook Justice Commission, the state's first truth-telling inquiry.
"I am acutely aware these people died while in the custody of the state, isolated from their families, their community and their country," she said.
"For their passings, I express my deep regret and sorrow."
Bail laws were strengthened in 2018 after James Gargasoulas drove into a busy Bourke Street Mall in Melbourne, killing six people and injuring dozens more. He was on bail at the time.
Ms Houghton's evidence at the truth-telling inquiry prompted emotional pleas from commissioners on Tuesday.
One said the blood of Aboriginal people who died in custody was on the state, after the government neglected to listen to the Aboriginal Justice Caucus's concerns about the bail changes.
Commissioner Sue-Anne Hunter urged Ms Houghton to go and talk to Aboriginal women in prison.
"Do you know how scared they are about another death in custody? They are petrified the next one will be them," she said.
In the year ending June 2022, more than 1300 Aboriginal people were imprisoned in Victoria.
Almost 90 per cent were on remand, while only one in 10 were sentenced offenders.
Half those released that year spent no time under sentence, with the inquiry hearing many opted to plead guilty and be released based on time served rather than wait for a hearing.
Five Aboriginal people have died in custody in Victoria since January 2020 including Veronica Nelson, whose death prompted a coroner to call for an urgent review of the bail act.
"These people could have been saved," Ms Hunter said.
"Some of these families sat in front of us. It's not too late for justice for these people"
The Victorian government intends to overhaul the bail laws this year.
Ms Houghton agreed the justice system did not operate with prison as a "last resort".
"It needs to change. That is accepted from the department and from government," she said.
Bail reforms, treaty and raising the age of criminal responsibility would go some way to righting the wrongs of the past, she suggested.
Victorian Labor has been in power for 20 of the past 24 years.
Premier Daniel Andrews said his government took full responsibility for conditions and injustices that have led to Aboriginal and Torres Strait Islander children being over-represented in criminal justice and child protection systems.
"You don't set up a truth-telling commission if you're not prepared to call time on this and chart a better course," he told reporters on Tuesday.
Yoorrook is the first formal truth-telling inquiry into past and ongoing injustices against First Nations people in Victoria, as part of the state's treaty process.
Police accountability expert Tamar Hopkins told the inquiry there was "something inherently impossible about having the police investigating themselves" and pushed for effective and independent oversight of Victoria Police.
She conducted a survey in 2018-19 and found racial profiling still existed within the force despite it introducing a ban.
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