Indigenous Health Minister Warren Snowdon says he supports calls for non-violent Indigenous offenders to undergo rehabilitation instead of jail.
A new report claims governments could save up to $A111,000 per year for each Indigenous offender moved out of prison and into treatment programs.
The report was commissioned by the Australian National Council on Drugs and prepared by the accounting firm Deloitte Access.
Mr Snowdon says it makes sense.
"It's an easy cop in terms of the 'soft on crime' issue to jail people if they offend in any way, but frankly I think we ought to be looking very carefully at that," he told SBS.
"We need to look at other measures. We need to be looking at other interventions".