Sydney, Jan. 28: Australian Prime Minister Kevin Rudd is reportedly set make a full apology to Aboriginal people when Federal Parliament sits next month.

On Australia Day on Saturday, Rudd named race relations between indigenous and non-indigenous Australians as one of the nation's great challenges.

He told his guests at the Lodge on Saturday night he wanted the country’s indigenous people to be "full participants" in society, rather than marginalised Australians, News Ltd reports.

While he has ruled out paying compensation to Aboriginal people who were removed from their families as part of the stolen generation, moves are underway for the "sorry" declaration to come on February 12 when new MPs formally take their seats in parliament.

The former Howard government refused to apologise to the stolen generation. (ANI)