More than $110,000 could be saved per year per offender if non-violent indigenous offenders were diverted to drug and alcohol rehabilitation programs, a report by Deloitte Access Economics said.
A further $92,000 per offender could be saved in the longer term through lower mortality and better health, according to the report commissioned by the Indigenous Drug and Alcohol Committee of the Australian National Council on Drugs (ANCD).
ANCD chairman John Herron said he hoped the report would spur authorities to take action through the Council of Australian Governments.
Dr Herron said a good place to try the proposal first could be the ACT, where the government already wanted to introduce a prison-based needle and syringe exchange.
"The ACT has been more receptive to progressive activity in this regard. Even if the ACT government did it as a forerunner - although you've already built your new prison - it can be shown that there are savings by putting people into rehabilitation,'' he said.
Dr Herron said it did not make sense for Australian governments to spend $3 billion a year on prisons.
"The cost of getting somebody into treatment was about $60,000 a year. And it was just a no-brainer - half of those didn't reoffend,'' he said.
"The system just goes on and on and we're building more prisons all the time. It's just absurd, particularly with indigenous offenders, where 70 per cent of them are effectively intoxicated, or on drugs when they commit an offence.
"We're not taking about violent offenders - we're only talking about people who are in for non-violent charges.''
The Deloitte Access report found that indigenous offenders were less likely than other offenders to be diverted by courts to drug and alcohol treatment facilities.
In 2009, just 10 out of 17,859 people diverted by courts to drug and alcohol treatment were indigenous.
In 2011, about 7600 of the 29,000 prisoners in Australia were Aborigines or Torres Strait Islanders.
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