Rae called the Act, which was first passed in 1876, an "expression of the colonial relationship of the time."
"It's way past time that we transform that relationship," Rae told reporters, saying it's not enough for the government to simply repeal the Act.
Rae called for a new "government to government" relationship to establish mutual confidence, mutual acountability and mutual transparency.
He said in recent years the federal government had not been accountable to First Nations on the transfer of "deeply discriminatory" funding for things like health care, child welfare or housing.
"We have as many kids now who are in care across the country as we had during the residential schools crisis," he said. "We have not made the progress which the government claims to say it wants to make."
Rae also condemned the federal government for acting unilaterally and "imposing its will on communities," citing what happened in the Northern Ontario community of Attawapiskat last winter as an example.
"Most Canadians feel that this is simply a relationship that needs to change," Rae said. "What's going on today is simply not good enough."
Tory private member's bill debated last week
Rae's emphasis on consultations with First Nations towards changing the Act follows the first hour of debate last week on a Conservative private member's bill that aims to replace it outright.
Aboriginal Affairs Minister John Duncan said the government will pass proposed legislation from a Saskatchewan Conservative MP aimed at overhauling the Indian Act — although there may be changes.
Opposition MPs spoke against Desnethé-Missinippi-Churchill River MP Rob Clarke's proposed Indian Act Amendment and Replacement Act when it was debated for the first time on Thursday.
"The Indian Act is a barrier to the success of many First Nations, which is why we support in principle the private member's bill that proposes concrete, incremental steps to create the conditions for healthier, more self-sufficient First Nations communities," Duncan said in reply to a question from Clarke in question period last week.
"This approach is consistent with the government's own approach to Indian Act reform. We look forward to studying the bill, exploring opportunities to improve it and passing it into law."
Tory bill 'not a partisan effort': Clarke
The Indian Act is the law that describes the government's financial responsibilities and other commitments to First Nations people and sets out the system of reserves.
Many people have argued that it's paternalistic and should be scrapped in its entirety.
Clarke says that's what he wants to happen eventually, although his bill would make some changes that wouldn't gut the main parts of the law.
Instead, the proposed changes include:
- removing references to residential schools.
- removing obsolete language that says First Nations can't sell alcohol on First Nations land.
- allowing First Nations to pass their own bylaws without federal permission.
Clarke said the most important part of his legislation is a requirement the aboriginal affairs minister report annually on the progress being made toward the repeal and replacement of the Indian Act.
"This is not a partisan effort," Clarke said. "I am doing this as a proud Canadian who has served my country and also as a First Nations man who wants to see a better life for First Nations and all Canadians."
During debate, NDP and Liberal MPs said they're opposed to the bill because, among other things, Clarke didn't properly consult First Nations. That's a complaint that the Federation of Saskatchewan Indian Nations has also raised.
Clarke, a member of Saskatchewan's Muskeg Lake First Nation, said he contacted more than 600 First Nations and asked for input.
"Consultation does not entail receiving emails from people," B.C. New Democrat Jean Crowder said. "It does not entail posting some information on one's website."
Rae told reporters Monday he hasn't heard very much support for Clarke's bill among First Nations leaders. He said MPs from his party have not been asked for their views in advance.
Clarke got some support from Alberta Conservative Brian Storseth, who said the bill will start a needed dialogue between the government and First Nations.
"We all agree this is a paternalistic piece of legislation that has been a failure and that is rooted in 200-year-old language," he said.
When the debate ended, the acting Speaker said the bill (C-428) would drop to the bottom of the order paper, likely coming up for its second hour of debate in a few months.