The Productivity Commission will launch an investigation into the trade of Indigenous art as the federal government looks for ways to safeguard the sector.

Indigenous Australians Minister Ken Wyatt said Aboriginal and Torres Strait Islander art - a vital part of Australia's identity - was being undermined by inauthentic material.

"We know that a significant and increasing proportion of products in the style of Aboriginal and Torres Strait Islander arts and crafts that are sold in Australia are imitations," he said on Thursday.

Mr Wyatt said fakes misled consumers and provided no economic benefit to Indigenous communities.

"These imitation products also cause offence and do not have any connection to Aboriginal and Torres Strait Islander peoples and cultures," he said.

He said the inquiry would enable Australia to maintain an equitable and authentic Indigenous arts and crafts market.

A 2018 parliamentary report into the issue found 80 per cent of Indigenous souvenirs sold in Australia were not genuine.

The inquiry, which is due to hand down its final report by the end of next year, will examine the structure of domestic and international markets.

It will also look at market barriers affecting artists and other stakeholders, along with access costs, risks and governance arrangements.

Arts Minister Paul Fletcher said the study would propose policies to support a professional, viable and ethical sector.

"Australian Indigenous visual art is internationally acclaimed for its quality, innovation and cultural richness," he said.

"Art is an important way for Aboriginal and Torres Strait Islander peoples to tell stories, share and strengthen cultures, and drive economic opportunities."

Australian Associated Press