TASMANIA is running Australia's most inefficient prison system, with operating costs at more than $300 a day for every inmate.
The national average for 2012-13 was $200 a day, according to the Productivity Commission's report on government services.
Once capital costs were factored in, the cost per prisoner increased to nearly $400 a day, second only to the ACT.
Tasmanian prisoners spent some of the fewest hours outside a cell compared with inmates in other states.
Their 8.6 hours a day "out-of- cell" time was below the national average of 10 hours.
The report said increasing time spent outside a jail cell improved a prisoner's transition into society on release.
Tasmanian inmates were also close the bottom when it came to employment and study in jail.
Just 25 per cent of inmates were enrolled in education or training programs, the third lowest level in Australia. However, Corrective Services director Robert Williams said these indicators would increase following the completion of prison redevelopments.
"The investment of around $20million is specifically aimed at providing facilities to improve rehabilitation, industry and education opportunities for the inmates at the complex," he said.
"It should be noted that the delivery of vocational education in the Tasmanian prison system has more than doubled over the last two years."
He said education courses such as computers, literacy and the CD to Books program along with peer tutors which were offered in Tasmanian prisons were not included in the commission's report.
Running prisons involved high fixed costs that heavily impacted smaller jurisdictions like Tasmania and the ACT, Mr Williams said.
Larger states like NSW and Victoria could also use their size to lower costs per inmate.
Tasmania's imprisonment rate increased between 2008-09 and last financial year, however, it was still the lowest in Australia.
Like all states and territories, Aborigines were massively over- represented in the Tasmanian prison population.
Nonetheless, Tasmania maintained the lowest incarceration rate for Aborigines compared with other states.