Speculation the Baird government will open private prisons to tackle overcrowding has been heightened with revelations the British detention giant Serco met with Attorney General Brad Hazzard to discuss its prison programs.
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NSW prisons are stretched 10 per cent beyond capacity, a new Productivity Commission report says.
Prison utilisation leapt from 96.5 per cent to 110 per cent last year, on the back of "unprecedented growth in prisoner numbers", the report said.
It warned that exceeding 100 per cent capacity was likely to impact on assault rates among inmates.
Prisoner numbers reached a peak of 11,021 last year, but the Baird government failed to provide any money for new prisons in its budget.
With changes to the Bail Act coming into effect last week, prisoner numbers are expected to rise significantly again in 2015.
Premier Mike Baird said in January the government was potentially looking at new prisons, as well as using demountable units, to increase prison capacity.
Ministerial diaries show Mr Hazzard met with Serco in November to discuss "the impact of crime and reoffending."
A Serco Asia Pacific spokesman, Paul Shaw, said the company runs prisons in Western Australia, Queensland, New Zealand and Britain which "help the public by reducing reoffending."
"We are always seeking to share experience and expertise with other jurisdictions," he said of the meeting.
Mr Hazzard said the meeting was confidential.
Former Grafton prison governor John Heffernan said the prison union had met with Mr Baird and Mr Hazzard on the issue of overcrowding, but they had refused to reopen government prisons closed by Mr Baird in 2011.
"With this Bail Act, the prison population will skyrocket. They are talking about demountables in the short term. It will be a real problem," said Mr Heffernan.
The shadow attorney general Paul Lynch said a Labor government, if elected, wouldn't open more private prisons, and would instead reopen the Kirkconnell prison, reopen a closed annexe at Cooma and better utilise Grafton.
"A properly run prison system in NSW doesn't need further privatisation," Mr Lynch said.
He accused the Liberal and Nationals government of a "confused and chaotic" approach to corrective services.
"Upon election they closed three prisons completely and dramatically reduced the capacity of a fourth... this not surprisingly led to serious overcrowding. This makes prisons, already dangerous places, even more dangerous, especially for corrective services staff. It also makes rehabilitation less likely to be successful."
Mr Heffernan said the union has demanded the restoration of workers compensation conditions in recognition of the more volatile working conditions.
Corrective Services commissioner Peter Severin told a parliamentary inquiry in 2012 that spare capacity of 5 per cent in prisons was required as a buffer for the "effective management of the inmate population" and to "avoid the need for hot-bedding".
Corrective Services began converting two-man cells to accommodate three people at the private Parklea prison last year.
Dollars spent per prisoner in NSW fell from $190 to $181, and was below the national average of $219. Serious prisoner on prisoner assaults rose from 0.28 to 0.36 per 100 prisoners, and escapes almost doubled from seven to 13 last year.
Mr Hazzard said Corrective Services NSW is mobilising additional capacity to meet the demand.
"A rising prison population is not indicative of the rate of crime in the community – under the Liberal and National governments, NSW has seen its best crime statistics on record with all major crimes having fallen or remained stable," Mr Hazzard said.
