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  • The government spent $3.1 billion on the justice sector in the year ended June 2009.
  • This is 4.8% of core Crown spending and 1.7% of GDP.
  • The main justice sector agencies are:
    • New Zealand Police - about 40% of total justice sector spending in 2009
    • Ministry of Justice (including Courts and the Judiciary) - about 30%, and
    • Department of Corrections - about 30%.
  • The justice sector has been one of the fastest growing areas of major spending – averaging 7% a year from 1994 to 2009.

Crime is costly to society, both in terms of the cost of crime to victims, and the cost of the response to crime. The burden of crime also falls disproportionately on different parts of society, particularly Maori.[27] Policy decisions in the justice sector take into account objectives that are beyond the economic and fiscal, such as punishment and rehabilitation. However, given the fiscal constraints faced by the government, increasing consideration will need to be given to whether policies meet the government's objectives in the most cost-effective way.

The justice sector agencies form a system or "pipeline" in which policy or operational changes in one part of the system can have a major impact on the other parts. While the main agencies in the sector are separate, costs are driven by the way that police operations, sentencing policy and the decisions of independent actors (such as judges and the Parole Board) interrelate.

One of the challenges of managing justice sector spending is that the agency which has the biggest influence over the number of people entering the system (Police) does not bear the fiscal consequences of sending more people into the system (which are primarily borne by Corrections). If the volume of offenders in the justice sector increases, the agencies that are earlier in the pipeline can pass these increased volumes onto the next agency with little immediate consequence for their own operations. This can result in agencies seeking extra resources for volume increases, rather than aiming to reduce the volume of people coming into the sector.

Figure 7.4 - Criminal justice sector - main agencies
Figure 7.4 - Criminal justice sector - main agencies.
Source: The Treasury

Spending in the justice sector doubled in inflation-adjusted terms, from 1994 to 2009. The increase in spending has not been linked to recorded crime rates, which have been broadly stable over the same period. Rather, cost growth has been driven primarily by the decisions of governments.

In 1999, New Zealand imprisoned 150 people per 100,000. In 2009, the imprisonment rate has increased to 195 people per 100,000, and under current policy settings this rate is forecast to reach 225 per 100,000 by 2017. Our imprisonment rate is the fifth highest in the OECD and is significantly higher than rates in Australia, England, Ireland and Canada.[28]

Figure 7.5 - Imprisonment rates
Figure 7.5 - Imprisonment rates.
Source: King's College London - International Centre for Prison Studies

The cost of imprisonment

  • It costs just over $90,000 a year to keep a person in prison. This compares to:
    • $18,000 a year for a person on a home detention sentence, and
    • $7,000 a year for a person on a community detention sentence.
  • Building prisons is currently projected to cost about $915 million over the next decade. Running those prisons once they are built will have an ongoing cost of up to another $150 million a year.

These recent increases in spending have occurred while crime rates have remained broadly stable. The stability in the overall crime rate masks trends in specific types of crime. For example, recorded violent offences have been increasing over time, largely due to family violence offences.[29]

Figure 7.6 - Crime rate
Figure 7.6 - Crime rate.
Source: Statistics New Zealand

If justice sector spending were to increase by another 7% in 2011, it would take $230 million of the total $1.1 billion allocated for new spending in Budget 2009. This is more than 20% of the new spending allocation, when the sector represents only 5% of core Crown spending.

The sustainable debt scenario suggests that the justice sector would have to grow by an average of 3.6% per year over the next 40 years - about half the average growth rate in recent years.

Options for managing spending growth

It is not clear that further increasing our imprisonment rate would be the most effective way to reduce crime. Studies of the impact of imprisonment rates on crime rates have produced mixed results.Some studies have shown that, while imprisoning more people can reduce crime, the size of that impact diminishes as imprisonment rates increase. Other studies suggest that, when imprisonment rates reach a certain level, further increases can lead to increases in crime rates.[30] Given that New Zealand's imprisonment rate is already one of the highest in the OECD, and recent increases have had little impact on recorded crime rates, it is unlikely that further increases in our imprisonment rate will be the most cost-effective way to achieve lower crime rates.

There are steps that we can take to minimise spending pressures in the justice sector in the short to medium term. As imprisonment rates are a major cost driver, one step could be a review of sentencing practices to ensure that we are not increasing the rate at which low-level offenders are imprisoned. The justice sector is also looking at ways to use courts, police and prisons more effectively.

In the long term, investing in reducing the number of people who enter the criminal justice system would likely provide better value for money - and better societal outcomes - than locking up more people. The Ministry of Justice has already undertaken to address the drivers of crime. Potential areas to focus on to reduce crime include the impact of alcohol on offending, and interventions for at-risk children.

Some level of public and political consensus about the future direction of New Zealand's criminal justice sector could reduce growth in spending. Political consensus has been a significant factor in both Finland's and Canada's success in reducing their imprisonment rates.


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