Thousands marked Australia's national day on Friday with "Invasion Day" rallies in support of the country's Indigenous community, many of whom want to drop celebrations or move the date.

Australia Day commemorates the day Britain established the state of New South Wales a penal colony, arriving in what is now the state capital Sydney with a "First Fleet" bringing colonists and convicts.

Many people celebrate the holiday with barbecues and trips to the beach, and it is also a popular date for immigrants to receive their Australian citizenship.

But many Indigenous Australians, who make up 3.8% of the country's 26 million people, reject the holiday as marking the start of injustices suffered since European colonisation.

In Sydney, thousands of protesters, many waving Indigenous flags, gathered in the city centre at an "Invasion Day" rally before a march that closed nearby city streets.

Aboriginal elder Adrian Burragubba said he was at the rally to "tell people that Australia Day doesn't mean anything to us".

"It's the day of Aboriginal sovereignty," Burragubba said.

Protester James Cummings, a Sydney local, said it was "not the right day to be celebrating a national day".

"One of the strong themes that we are marching in support of today is just find a more appropriate day to celebrate the nation," Cummings said.

Similar rallies took place in other state capitals, including Victoria's Melbourne, Queensland's Brisbane and Tasmania's Hobart.