The Government might reconsider building new prisons as the number of inmates appears to have stabilised.
Corrections Minister Judith Collins says when she became minister in 2008 there were forecasts the prison population would increase by about 2000, but that is not happening.
Ms Collins has told Parliament's law and order select committee on Wednesday that instead of the prison population rising, the number of people in jail has actually fallen slightly.
That leaves open the possibility of closing old prisons such as Mt Crawford in Wellington, which is decrepit and unsuitable to undertake rehabilitation, she says.
The minister says a fall in the crime rate is behind a drop in the number of people being held in prisons.
Figures on the Department of Corrections website show that at the end of March, there were 8755 inmates compared with 8816 a year ago.
Meanwhile, Corrections chief executive Ray Smith says the department has also developed a strategy to cut down on re-offending when inmates leave jail.
Mr Smith says one part of the strategy is to get inmates into work when they leave prison.
"The other is around the drug treatment programmes. It is the single most effective programme that we run. It's in eight prisons going to nine, and it seems to us that we should do whatever we can to shift resources to get it right across the prison network.
"If you deal with the drug and alcohol addiction and you find a real job for people, there's a big incentive."
Mr Smith says a lot of work is being done in prisons to give inmates the skills and qualifications they need to get work when they are released.