Speaking at an official welcoming ceremony on Thursday, Benedict said Australia's Aborigines were an essential part of the country's cultural landscape, and spoke of their plight since the first British settlers arrived 220 years ago.
"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, left, kept his election pledge by apologising to the Aborigines [AFP]
In 2001, Benedict's predecessor, John Paul II, issued a formal apology to the indigenous peoples of Australia, New Zealand and the Pacific islands for injustices perpetrated by Catholic missionaries.
Kevin Rudd, Australia's prime minister, made a formal apology to Aborigines as one of his first official acts after taking power.
He has said closing the gap between indigenous and non-indigenous Australians is a priority of his government.
Aborigines, who make up about 450,000 of Australia's 21 million population, are the country's poorest group with the highest rates of unemployment, illiteracy, incarceration and alcohol abuse.
In his remarks, Benedict also touched on the problem of global warming – an issue he has said he wants Catholics to think more about.
"With many thousands of young people visiting Australia at this time, it is appropriate to reflect upon he kind of world we are handing to the future generations," he said.
Following Thursday's official welcome the pope was driven across Sydney's landmark harbour bridge to prayers at a chapel devoted to Mary MacKillop, a woman many Australian Catholics hope will be named as Australia's first saint.
Celebrated for her work caring for children, MacKillop was canonized in 1995 during the last visit to Australia by a pope.
During the flight to Australia, Benedict told reporters he hoped his trip would heal some wounds caused by sexual abuse by clergy - a scandal that has dogged the church in recent years.
The pope's visit has triggered a fresh examination of the issue in Australia, but on Wednesday one of the key organisers of the visit caused controversy by suggesting the church should move on from the issue.
Bishop Anthony Fisher said people should focus on the young pilgrims' goodness "rather than dwelling crankily, as a few people are doing, on old wounds."
His comments angered victim support groups who said the church still had not taken enough action to ensure abuses were not repeated.
"The Catholic Church has a lot to learn about the burden of clergy abuse on the lives of victims," Michael Salter of the group Advocates for Survivors of Child Abuse told the Associated Press.