Indigenous Affairs Minister Nigel Scullion described the salty spread as a "precursor to misery".
He said it was being bought in bulk to make moonshine.
Brewer's yeast is a key ingredient in the spread and is used in the production of beer and ale.
In communities where alcohol is banned because of addiction problems, Mr Scullion said Vegemite sales should also be restricted.
that the yeast in Vegemite is deactivated as it's processed. As my wife said yesterday when we were talking about the story, trying to extract brewer's yeast from Vegemite would be like trying to extract an egg from a cake.