CEDA Chief Economist Jarrod Ball explores the cost of recidivism to the Australian economy

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.

from JARROD BALL, CHIEF ECONOMIST, cEDA: Australia pays the price for increasing rates of imprisonment

Today’s post is an briefing from Jarrod Ball from CEDA on the current economic costs of imprisonment in Australia:

The costs of imprisonment can be thought of in terms of the direct cost to government budget and the indirect costs to the economy.

Budget costs

  • The annual costs of prisons in Australia reached over $4.6 billion in 2017-18, equating to $302 per prisoner per day.
  • While it has received scant attention in the analysis of state budgets, there has been a significant increase in the operating costs of prisons in recent years as rates of imprisonment increase.
  • In the five years to 2017-18, the operating costs of prisons increased in real terms at an annual rate of 6.7 per cent. This is greater than the rates of growth in expenditure on General Practitioners (3.7 per cent) and early childhood education (5.1 per cent) over the same period.i This rate of growth is also significantly greater than expenditure growth in other parts of the justice system including police and courts.ii
  • 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.iii
  • The growing budgetary costs resulting from increased imprisonment deserve greater scrutiny at a time when state and territory budgets are being squeezed by increasing demand for services like health, while tax bases come under pressure from subdued economic growth.
  • In this environment, it is increasingly important that state and territory governments are achieving better outcomes from their scarce resources. Despite increased rates of imprisonment and associated expenditure, reincarceration rates are high – at least half of all prisoners in 2017- 18 had been imprisoned as adults previously.iv Therefore increased imprisonment and the resulting expenditure has not produced better rehabilitation outcomes.

Indirect costs

  • 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.v Research undertaken in Victoria found that average lost productivity for each prisoner there was over $16,000.vi
  • The impacts on the economy from imprisonment extend further, with costs incurred through deteriorating physical and mental health of prisoners, and reduced welfare for their families including increasing resort to 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.vii

Endnotes

i Author’s calculations based on Productivity Commission, 2019, Report on Government Services 2019. Accessed from: https://www.pc.gov.au/research/ ongoing/report-on-government-services/2019

ii Ibid.

iii Queensland Productivity Commission, 2019, Inquiry into Imprisonment and Recidivism – Draft Report, p.ix.

iv ABS, 2018, Prisoners in Australia, 2018, Catalogue No. 4517.0, Accessed from: https://www.abs.gov.au/ausstats/abs@.nsf/mf/4517.0

v Australian Institute of Health and Welfare 2015. The health of Australia’s prisoners 2015. Cat. no. PHE 207. Canberra: AIHW.

vi A.Morgan, 2018, How much does prison really cost? Comparing the costs of imprisonment with community corrections, research report no. 5, Australia Institute of Criminology, Australian Government.

vii Queensland Productivity Commission, 2019, p.68.