Locking people up is big bucks for private prison operators who can form powerful lobby groups to influence sentencing laws, an economist has warned.
Professor John Quiggin, from the University of Queensland, has highlighted the pitfalls of privatising prison operations after a report reignited the debate.
Former federal police commissioner Mick Keelty has recommended in his review of the Police and Community Safety department that the operation of prisons be subject to contestability.
Unions say this means privatisation.
Prof Quiggin agrees and warns there are many drawbacks to having a large number of privately operated jails.
He says the pitfalls are now on full display in the United States, where the growth of private operators has resulted in a powerful interest group that has a financial incentive to lobby for longer prison sentences.
"The private operators in the US have become a big and powerful lobby group," Prof Quiggin told AAP.
"They're in the business of locking people up and as a result they lobby for laws to lock more people up and for longer."
While contractual arrangements are complex, he says essentially private operators receive taxpayer dollars for every inmate and for the length of their stay.
In an extreme example of adverse impacts, two judges in Pennsylvania were found guilty of accepting millions of dollars in kickbacks from a private prison company to send teenagers to youth detention centres.
It resulted in thousands of young men and women being unjustly imprisoned.
Prof Quiggin also said the privatisation of jails would inevitably lead to job losses.
"It's common for private operators to hire a new work force with lower wages and less conditions (than public sector workers)," he added.
It's also not clear whether the state saves money by outsourcing the operation of its jails, he said.