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This integrative review seeks to employ insights from critical social psychology and Indigenous nation building governance research to advance an explanation for why Australian state policy continually fails to improve the lives of Aboriginal and Torres Strait Islander peoples and reproduces trauma. The review suggests that settler-colonial law and policy embed a history of oppressive relations that suppress Indigenous voice, culture, and identity, inexorably leading to intergenerational traumatic social and wellbeing outcomes for Indigenous peoples. Given settler-colonial policy's ongoing role in continuing the subordination of Aboriginal and Torres Strait Islander law/lore, the ongoing policy failure to redress Indigenous inequality and improve their wellbeing is unsurprising. Nevertheless, our analysis contributes to understanding how just and viable relations between Australian Indigenous peoples and the settler-colonial state are possible through collaborative politics. Allowing space for agreement and disagreement in their worldviews, collaborative negotiations offer a way forward to redress policy failures and traumatic outcomes that are currently entrenched.