Opinion article

Australia pays the price for increasing rates of imprisonment

With rising rates of imprisonment, CEDA Chief Economist Jarrod Ball explores the cost of recidivism to the Australian economy. 

The public’s focus on crime statistics is often personal - what do crime rates suggest about personal safety in my city or local neighbourhood?  In many instances, there is an overwhelmingly positive story to tell about recent trends in crime. For example, a recent report from the Australian Institute of Criminology puts the homicide rate at its lowest level in 25 years.

Despite this, a ‘tough on crime’ mantra has prevailed across state governments and CEDA’s 2018 nation-wide poll, Community Pulse, highlighted that Australians place importance on tough criminal laws and sentences. The flip side is that we are placing increasing numbers of people into a system that is not working to rehabilitate individuals and break the cycle of offending.

Compared to a decade ago, Australia is putting 51 more people into prisons for every 100,000 of our adult population, reaching 221 for every 100,000 last year. This now places Australia around a fifth higher than the OECD average for rates of imprisonment.

Even more concerning is that the most rapid growth in prisoner numbers is for Indigenous people and women. Prisons are also increasingly occupied by lower level offenders. For example, in Queensland the median prison sentence is less than four months and 65 per cent are for non-violent offences. 

But most concerning of all is that at least half of all prisoners in 2017-18 had been imprisoned as adults previously. Without a greater focus on rehabilitation, the cost to society, both economic and social, will continue to grow unchecked.

The human costs of increasing imprisonment are devastating but often hidden from public sight. But the economic costs are increasingly obvious, eating up taxpayer dollars, hitting state budgets and impacting the productive potential of our economy. 

According to the Productivity Commission, the annual cost of prisons in Australia reached over $4.6 billion in 2017-18, equating to $302 per prisoner per day.

Unsurprisingly, increasing rates of imprisonment are driving significant increases in the operating cost of prisons. In the five years to 2017-18, the operating cost of prisons increased in real terms at an annual rate of 6.7 per cent. This eclipses other rates of government spending growth over the period, including on General Practitioners (3.7 per cent) and early childhood education (5.1 per cent). It also outstrips expenditure growth in other parts of the justice system including police and courts.

If current trends continue, significant new investment will be required. The Queensland Productivity Commission estimates that in Queensland alone, $5.2 to $6.5 billion in new investment will be required for prison capacity to meet demand in 2025. Victoria’s recent budget included $1.8 billion of investment in new prison capacity.

This is a sizeable challenge for state and territory budgets at a time when they are being squeezed by ballooning demand for services and increasingly narrow and fragile tax bases to pay for those services. The imperative for state and territory governments must be to achieve better outcomes that meet community expectations with the scarce resources available.

While the indirect costs of imprisonment are less easily quantified, the lost potential for the economy is substantial. In 2015, a survey by the Australian Institute of Health and Welfare (AIHW) found that over a third of prisoners were in employment in the 30 days before imprisonment, with another third either seeking employment or studying. This translates into lost economic potential –research undertaken in Victoria by Anthony Morgan for the Australian Institute of Criminology found that average lost productivity for each prisoner there was over $16,000.

The impacts on the economy from imprisonment extend further, with costs incurred through deteriorating physical and mental health of prisoners, and families of prisoners relying on crisis and income support. The Queensland Productivity Commission has recently estimated that indirect costs for each prisoner in Queensland are at least $40,000 a year.

These statistics are alarming and underline growing need for change in the justice and corrections systems. Last week Deakin University convened its 15th Annual Reintegration conference, an enduring dialogue on how Australia re-thinks its criminal justice system. This year’s conference focused on the services and supports needed for people who experience stigma and discrimination after prison so that they can rebuild their lives.

This idea of re-thinking criminal justice appears to be catching on and may yet revive some of the reformist zeal in the federation. Some state governments are showing promising signs that they will take steps to reverse recent trends. Next month the Queensland Productivity Commission will deliver its final report to the government from its 12-month inquiry into imprisonment and recidivism, following a draft report that suggested 18 improvements to the current system. In Victoria, the Corrections Minister has signalled a review of the Corrections Act to address increasing imprisonment and recidivism. 

There is much more to be done, but the economic numbers alone suggest that the case for substantial reform is compelling across the federation.

CEDA touched on this issue in Connecting people with progress and will continue to look at this issue through our policy stack of five critical areas of focus where Australia can drive better social, economic and environmental outcomes. This is an area where CEDA is prepared to take a positive role in facilitating collaboration and discussion across the community.

About the authors

Jarrod Ball

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Jarrod Ball joined CEDA as Chief Economist in 2017 with over 15 years of experience as an economist across the public and private sectors. He has held senior roles at the Business Council of Australia, in EY’s advisory services practice and more recently at BHP. Jarrod also worked in the Federal Government and was a lead adviser on microeconomic reform for the Victorian Departments of Premier and Cabinet and Treasury and Finance. He is a member of CEDA’s Council on Economic Policy and the Melbourne Economic Forum. Jarrod holds a Masters degree in Economics from Monash University and undergraduate degrees in Business (Economics) and Arts from the University of Southern Queensland.