Yeah, like someone posted above, it was largely to breed them out. The original theory was that the Aboriginal people were primitives who were likely to die out.
And yes, they were covered under the Fisheries and Fauna act.

It was considered a kindness, to help them by making them less 'savage'. Sadly, they didn't actually look very far into the families they were sent to. The woman I've met who was taken from her family was practically a slave. She was sexually abused, as were her siblings who were sent to other families. She was about 40 years old. I don't need to go on, but her entire family suffers from depression, alcoholism, drug abuse and the accompanying problems.

The point I want to make is that the problems we see in Aboriginal communities now are not the same as 30-50 years ago. It wasn't like taking a kid from an abusive, drug addicted mother and putting them in suburban family with 2.4 children and golden retriever.
I'm not saying that the current problems are the result of removing children from their families, but I'm fairly sure the proliferation of such problems is due to the 'caretaker' attitude of white Australia.

Have you seen Rabbit Proof Fence?