The policy was an attack on Aborigine culture, campaigners say
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Australia's state of Tasmania has unveiled a AU$5m (£2m) compensation plan for Aborigines removed from their families as children by the government.
The proposed bill - a first of its kind in Australia - offers one-off payments to the so-called "stolen generation".
More than 100 Tasmanian Aborigines are expected to qualify for compensation.
Thousands of Aborigines were taken from their homes in Australia under ethnic assimilation policies that lasted for several decades until the 1970s.
The compensation package was announced by Tasmanian State Premier Paul Lennon.
"The funding pool... can't undo the wrong that was done," he said.
"But it certainly can help the members of the stolen generation know that today's generation acknowledges the fundamental, terrible wrongs that were done."
Under the proposed measure, descendants of deceased members of the forcibly removed Aborigines will receive up to AU$5,000 (£2,000), capped at AU$20,000 (£8,000) per family.
The remainder of the funding will be divided between living members.
The bill is expected to be introduced in Tasmania parliament later in October. It has already been endorsed by opposition parties.
Compensation claims can be filed for six months after the bill is passed, and an independent assessor will consider each case.
"Compensation... gives [people] the opportunity to move forward and re-order their lives with some financial assistance," Michael Mansell of the Tasmanian Aboriginal Centre told the AFP news agency.
In 1997, the Tasmanian parliament formally apologised for the policy of forceful removals of children from their families.
Sorry Day
Members of the "stolen generation" have said the experience of being wrenched from their families at an early age has left very deep scars.
They talk of a loss of identity after being brought up by white foster parents or in institutions, oblivious of their indigenous heritage.
Campaigners believe the policy was designed to eradicate Aboriginal culture by severing ties to family and tribal land, as well as destroying language and customs.
Australia has been holding its National Sorry Days since 1998 to remember the forceful removals.
In 1997, Australia's Human Rights and Equal Opportunities Commission released a report, urging the government to issue an official apology to the victims.
The report said such a measure would help to reconcile the indigenous and non-indigenous communities.
The government in Canberra has expressed regret for the policies of forcible removals, but Prime Minister John Howard himself has repeatedly refused to apologise.
He has said that today's Australians were not responsible for the policies of the past.