Waminda, who has been advocating for a Birthing on Country for over four years, said it would save the lives of Indigenous babies.

Their disappointment comes after numerous reports and recommendations that culturally safe birthing services significantly improve the health of Indigenous mothers and babies.

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Waminda CEO Faye Worner said this was a "missed opportunity" to work collaboratively with an Aboriginal Community Controlled Health Organisation to drive change and give Aboriginal women choice and control in birthing.

"Birthing on Country is not some pie in the sky concept - it is real, it is proven to work, and it will help Australia Close the Gap on mortality in First Nation's children younger than five," said Ms Worner.

"The rate of Indigenous infant health issues and infant deaths in Australia is shameful, but without investment from the Federal Government, we cannot seriously make inroads to Close the Gap in infant mortality rates."

Ms Worner said Waminda hoped to see a commitment to capital funding for an Australian first Birthing on Country and Community Hub, and will continue to advocate for the project.

"If the Government is serious about meeting the targets in the new National Partnership Agreement on Closing the Gap over the next 10 years, community-led change through initiatives such a Birthing on Country must be part of the Federal Government's plan," she said.

"We will continue to make this case to the Federal Government and look forward to working with Ministers Hunt and Wyatt on making this project a reality."

Birthing on Country returns maternity services to Indigenous communities that are accessible, relationship based, and culturally safe, incorporating traditional Indigenous birthing practices.

In 2018, the Indigenous child mortality rate was 141 per 100,000, which is double the rate for non-Indigenous children.

A recent study by Charles Darin University conducted over a five-year period found risky premature deaths reduced by 50% when First Nation's women use indigenous birthing services.

The study found indigenous women who had babies using Birthing on County principles are 50 per cent less likely to have a baby born preterm and less likely to need a Caesarean delivery.

"We've already demonstrated this model works. What we need now is action," said Ms Worner.

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