In these cash-strapped times, I’m often asked how governments can save money. One area Australian leaders have so far largely failed to consider is our prisons – the money we spend to build and staff them for the vast numbers of people who enter those gates and usually end up making at least one return visit.
Australian taxpayers spend more than $7.3 billion a year on adult incarceration and over $1.1 billion a year on locking up children. The cost of keeping one adult in prison for a year is almost $120,000. Spending on youth detention has more than doubled over the past decade and now costs an average of $1.3 million per year for each child.
Yet despite these massive outlays (imagine how we could support a child in the community and change their trajectory with $1.3 million), the evidence overwhelmingly shows that jailing is failing. Imprisonment makes further offending more likely (not less) and entrenches disadvantage that inevitably means greater spending down the line on unemployment support, health and housing.
From a fiscal perspective, it’s almost nonsensical. Policymakers around the world and from all sides of politics have recognised this. In the US, 21 states partially or fully closed at least one correctional facility between 2000 and 2022, reducing capacity by 81,444 prison beds. Here in Australia, the conservative Institute of Public Affairs has argued that the 37 per cent of people incarcerated for non-violent offences should not be dealt with by a prison sentence.
When governments chase votes by being seen to be “tough on crime”, the economic arguments against overreliance on prisons often fall by the wayside. This may change with the launch of a new coalition (which I have joined), Economists for Justice Reform, which believes that the economic case against prisons as our default policy response to crime and disadvantage should be given much more weight.
The number of people in Australian prisons has soared over the past three decades from 18,193 in 1996 to 49,295 in the most recent data, growing more than three times faster than the population itself. The surge is largely driven by much higher numbers of people who are on remand waiting for court, including many who have been charged with minor offences. This surge does not reflect higher crime rates, but rather the policy and legislative settings which are driving more people into prison and making it much harder for people to access bail.
As a result, our prisons have become even more overcrowded and cost more to staff and maintain. Access to education and services within prisons to help prevent reincarceration remains limited, as does post-release support. We are setting people up to fail again, with community safety also at risk. Recidivism rates in Australia are far higher than most comparable countries, with 45 per cent of adults released from prison returning there within two years and 84 per cent of children released from detention returning to sentenced supervision within 12 months.
Some work has been done to attempt to quantify the costs of this approach. A 2019 study of children at risk of criminalisation in NSW found that 7 per cent of individuals under the age of 25 will account for half the estimated cost of the state’s social services by the time they are 40 years old. Additionally, 1 per cent of this group will be responsible for 32 per cent of NSW’s total justice service costs, highlighting that early intervention targeting a small but critical group can reduce future costs significantly.
While there are long-term savings to be had, a change of tack would require governments to make large upfront investments into prevention and early support and intervention initiatives. The long-term savings can then be (re)invested into new or continued prevention and early intervention initiatives.
The Productivity Commission did some work on this in 2021, releasing a report on “Australia’s prison dilemma” and highlighting alternative approaches to prison that could achieve better outcomes at lower costs, such as diversion programs, restorative justice and home detention.
But the missing part of this equation to date has been the political courage to say that locking people up isn’t always the smartest approach. Getting politicians to do what makes economic or moral sense is often challenging amid rising populism and media cycles driven by clickbait algorithms.
Continuing to throw billions at a system that drives further offending is poor policy and fiscal negligence. At a time when governments are stretched and debt is growing, a reassessment of our costly overreliance on prisons and the relative lack of investment in evidence-based alternatives to incarceration would prove valuable. We will see far greater returns from investing upfront where the dividend is highest: keeping people out of prison in the first place.
Saul Eslake is an independent economist and an inaugural member of Economists for Justice Reform, established by the Justice Reform Initiative.
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Saul Eslake is an economist and principal of Corinna Economic AdvisoryFrom our partners
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