The union representing most prison officers says that legislation opening the way for private prisons is a national disgrace.
Parliament passed the Corrections (Contract Management of Prisons) Bill by 68 votes to 53 on Thursday morning, and tenders are now expected to be sought for the contract to manage one or more prisons.
The Government will decide early next year which jails may be opened up to private management.
Corrections Association president Beven Hanlon says it will end badly.
"We're predicting now that the cost of these prisons will blow out and cause millions of dollars' worth of additional costs for the taxpayer for less performance," he says, "and we're going to end up bailing these guys out."
Mr Hanlon believes six of the country's newest prisons will be privatised.
Howard League favours public prisons
The Howard League for Penal Reform says that while prison management in New Zealand has been abysmally poor over the years, it still believes prisons need to remain in public hands.
The league's president Peter Williams says there have been cases overseas where private prisons have abused inmates and not kept to their contracts. On the other hand, he says, there is no doubt that when the Auckland Remand Prison was in private hands it was well run.
The Prisoners Aid and Rehabilitation Society, which is philosophically opposed to the privatisation of prisons, says the state should be responsible for the well-being of prisoners, as it is for the taking away of their liberty.
Society director Lyanne Kerr says she's worried that private prisons will operate only to make a profit and that safety and even food cuts will follow.
Interest already expressed, says minister
The bill delivers on the National Party's election pledge to allow tendering for the management of prisons.
Corrections Minister Judith Collins says the Government has already been contacted by private companies.
"We have already had quite a lot of interest from companies who are interested in doing this and have experience," she told Morning Report.
She says private-sector management will bring greater innovation, efficiency and cost-effectiveness to the corrections system.
Privately run prisons in New South Wales cost 32% less than public prisons, she says, while in Victoria they are 11% cheaper.
Less accountability, less safety - Labour
But Labour's corrections spokesperson, Clayton Cosgrove, says figures supplied to Ms Collins by the Corrections Department show that when a prison was run privately in New Zealand it cost more than a public one.
Labour says that with private management there will be less accountability and transparency, because private companies are not open to parliamentary scrutiny, and that in turn will make prisons less safe.
Court cells made available for wider use
A bill passed through in its entirety under urgency in Parliament on Thursday afternoon allows court cells to be used to temporarily hold prisoners when there is pressure on the prison system.
The Corrections Department chief executive will need to be satisfied there is no other reasonable option, and prisoners will not spend any longer than four days in a court cell.
The Green Party was the only party to vote against the legislation, with co-leader Metiria Turei saying it raised human rights issues for prisoners and safety issues for staff.