Historical trauma and cultural dispossession has contributed to lower emotional and social well-being among Aboriginal Victorians, the state's mental health royal commission has heard.

The inquiry heard Aboriginal Victorians are twice as likely to be hospitalised for mental health issues and three times more likely to experience high levels of psychological distress compared to the general population. 

Helen Kennedy, from the Victorian Aboriginal Community Controlled Health Organisation says a lack of recognition of the effects trauma, marginalisation and dispossession contributed to the problem, and developing culturally appropriate services staffed by Aboriginal people was critical to improving outcomes.