Two themes dominate the purpose and content of this thesis. Firstly, social capital is a burgeoning body of research. This is demonstrated by the enthusiasm with which the World Bank has embraced and worked with the concept in problems of economic development and poverty alleviation. Secondly, Aboriginal Australians remain, in both absolute and relative terms, the most economically disadvantaged group in Australia. Despite years of direct efforts aimed at improving the socio-economic well-being of Indigenous Australians, they remain well below the national average according to a number of indicators of well-being such as life expectancy, standards of housing, average income, and employment. This thesis relates both important themes by analysing the development of Indigenous communities in the context of the body of social capital research. Social capital theory is used to appraise the effectiveness of past welfare policies towards Aboriginal people. It also suggests that future policies need to take into consideration social capital effects. This thesis also includes the first attempt to analyse the empirical relationship between social capital and economic development in Aboriginal communities. Though the results are inconclusive, direction is given for future research and data collection.