The Government has tabled legislation paving the way for the privatisation of the prison service.
If the Correction (Contract Management of Prisons) Amendment Bill becomes law private operators will be able to tender to run prisons in New Zealand.
The Government says co-operation between public and private sector providers will lead to more innovation and excellence in the prison system.
But the move has again drawn criticism from the Labour Party leader Phil Goff.
"You can have good private prisons, you can have bad private prisons. But the general experience has been that private prisons has not been a net benefit, has not stopped re-offending in any way more effectively than the public sector and that there are real difficulties when you create a profit motive within a penal system."
The last time a private company ran a prison was in 2000 after National contracted an Australian company to run the Auckland Central Remand Prison.