Pope Benedict praised the Australian government on Thursday for apologising for past injustices to Aborigines, saying it was a courageous move to repair race relations and offered hope to the rest of the world.
The Pope also highlighted Australia's moves to combat climate change, with the government planning a carbon trading system aimed at cutting greenhouse gases by 60 percent of 2000 levels by 2050, and called on "responsible stewardship" of the Earth.
Pope Benedict, in Sydney for World Youth Day celebrations from July 15-20, made his comments at a welcoming ceremony with Prime Minister Kevin Rudd on Thursday.
The Pope said the ancient heritage of Aborigines, who have been in Australia for some 40,000 years, formed "an essential part of the cultural landscape of modern Australia".
"Thanks to the Australian government's courageous decision to acknowledge the injustices committed against the indigenous peoples in the past, concrete steps are now being taken to achieve reconciliation based on mutual respect," he said.
"This example of reconciliation offers hope to peoples all over the world who long to see their rights affirmed and their contribution to society acknowledged and promoted."
Rudd officially apologised to Aborigines in February.
Australia's 460,000 Aborigines make up about 2 percent of the country's 21 million population and have consistently higher rates of unemployment, substance abuse and domestic violence, as well as a life expectancy 17 years less than other Australians.
The pontiff, who will sail up Sydney Harbour on Thursday to greet hundreds of thousands of young Catholic pilgrims from 179 countries, called for action to protect the environment.
"It is appropriate to reflect upon the kind of world we are handing on to future generations," said the Pope.
"The wonder of God's creation reminds us of the need to protect the environment and to exercise responsible stewardship of the goods of the Earth.
"I note that Australia is making a serious commitment to address its responsibility to care for the natural environment."
Australia is one of the world's highest per capita greenhouse emitters due to coal-fired power stations, is in the grip of the worst drought in 100 years and is struggling to save its major river system which feeds the nation's food belt.
Australia plans to introduce a carbon trading system by 2010.
The Catholic Church hopes World Youth Day, the brainchild of the late Pope John Paul II, will revitalise the world's young Catholics at a time when the cult of the individual and consumerism has become big distractions in their daily lives.
Sexual abuse in the Catholic Church has overshadowed the Pope's visit, with the church reopening a 25 year-old abuse case in Australia only days before the pontiff arrived.
The Pope has said he will apologise to Australian victims of sexual abuse in the church. Broken Rites, which represents abuse victims, has a list of 107 convictions for church abuse, but says there may be thousands more victims as only a few go to court.
The Pope confronted the issue of sexual abuse in the church during a visit to Washington in April, meeting victims and vowing to keep paedophiles out of the priesthood.
Some sex abuse victims plan to protest against the papal visit in Sydney, along with a group called "No Pope" which opposes church teachings on sex and marriage.