Corrections Minister Mark Mitchell says the coalition government will spend $1.9 billion over the next four years on more prison beds, prison officers and rehabilitation for remand inmates.
The money will pay for an 810-bed extension at Waikeria Prison, in Waikato.
Of that sum, $442m would come out of savings from back-office functions.
Prime Minister Christopher Luxon said the cuts to government agency back-office functions, including Corrections, were a "good thing" in that they were prioritising front-line services and were "just naturally what you do as a CEO."
"You take over an organisation, you have a certain budget, you've got to ask yourself, for the dollars that I'm spending, am I getting the outcomes that I'm being asked to deliver against?
"We've been very clear on the targets and the goals that we have, and how CEOs deploy that money is completely up to them.
"But in this case, this is a great example where we've been able to recycle funds out of the back office and into the front office so we can better support frontline Corrections services."
