The government is to spend $1 billion building another 1800 beds in prisons.
Most of the new places will be in a new 1500-bed facility at Waikeria Prison in Waikato.
The prison population is forecast to reach 10,000 by 2017 and Corrections is looking to recruit 600 new prison officers by next September.
Corrections Minister Judith Collins said the number of prisoners was increasing faster than projected, because of changes to bail laws for drug and family violence offences.
She said the Corrections Department was having to advertise for more prison staff, after last year slashing more than 250 prison jobs.
But Ms Collins said it was not poor planning.
"What we are doing is now planning for the future and we are very deadly serious about family violence and methamphetamine."
Last week Finance Minister Bill English said a healthy economic outlook meant the government had options for future spending, including a possible tax cut programme.
But he said the billion dollar price tag for prisons now had to be included in coming budgets.
"Look it reduces options. This is something that has to be done. We have to provide the capacity."
"We'd certainly prefer to be in a position where this wasn't happening but the money has to be spent and it does mean less available for other things," Mr English said.
The government is also looking at changing how re-offending is measured.
Ms Collins has also said the way re-offending rates were measured against government targets was making the rates look higher than they actually were.
"We have 25 percent fewer coming back into our prisons after five years."
"The target itself was the wrong target because what they looked at was recidivism itself, rather than offenders."
"In hindsight it would have been better to have set it on numbers of people rather than offending by those same offenders."
Mr English said there was discussion among Cabinet ministers about a possible change to the measure.
Prime Minister John Key denied the boost was a sign crime was on the increase.
He said it was more about the "changing nature" of crime.
"The overall crime rate's falling but the number of violent crime, probably crimes driven off drugs to a certain degree and domestic violence are going up.
Mr Key said that followed international trends.
"You saw overall crime rates falling internationally and we were consistent with that, and they continue to fall in total numbers, but that hardened end is definitely going up a bit.