"I think there'd be an expectation from the Aboriginal community that we'll come to it next," Mr Lennon said, adding that the issue would be addressed before the next state election, due in 2006. "Certainly, I think we probably need to give them some advice about where we're going."

He confirmed a process for handling the issue could mirror that currently being used to address abuse of state wards. Under this court-free system, claims are upheld or rejected by the ombudsman, with those upheld then assessed for a payout of up to $60,000 by an independent assessor.

Mr Lennon said he wanted that process to be completed before moving on to address the stolen generations, but he believed a similar model could be appropriate.

"It may well be . . . It does seem to me like it's been a good process – it's respected the human dignity of the individuals involved, maintained their confidentiality and given them a measure of closure," he said. "I haven't finalised my view on it at this stage, (but) I certainly haven't closed my mind off to the possibility of it."

Mr Lennon, who has discussed the issue with Aboriginal groups, said he would consider it in more detail after the introduction of land rights legislation to parliament in March. A bill to transfer three Bass Strait islands – Cape Barren, Goose and Clarke islands – to Aboriginal title was stalled last month by opposition from upper-house MPs.

But Mr Lennon predicted he would get the extra three votes required in March.

"Land rights is the next thing on our agenda. I don't believe, personally, you can have reconciliation with Aboriginal people without having land rights central to that," he said.

Michael Mansell, of the Tasmanian Aboriginal Legal Centre, urged Mr Lennon to address both issues – land rights and compensation for the stolen generations – concurrently. He said submissions to the state Government advised that the total cost of compensation for the stolen generations would not exceed $4 million.

Submissions suggested $100,000 be paid to Aborigines taken from their parents because of their race, mostly as the result of assimilation policies of the 1950s but as late as the 1980s.

"We have also suggested they receive up to $60,000 in further damages for any abuse that they suffered, whether under the existing system covering abuse of state wards or under a fast-track process, by looking at records and documents, to avoid them having to go through more trauma," he said.

Mr Mansell said it was hoped all state governments would follow Tasmania in its willingness to consider an apology.

"Instead of waiting for (Prime Minister) John Howard – who, we know, won't do anything – the states should act," he said.

Any proposal from Mr Lennon would have a good chance of broad political support in Tasmania. The state parliament has already apologised for the stolen generations, although unlike a government apology this is not a trigger for compensation.