Cutting sentences for prisoners who complete literacy and numeracy courses is an idea worth looking at, says Prime Minister Bill English.
ACT unveiled its new Rewarding Self-Improvement in Prisons policy at the weekend, saying it would reduce reoffending and the cost of housing New Zealand's prison population, which recently topped 10,000.
"A large chunk of the prison population simply lacks the skills to lead normal, productive lives," leader David Seymour said.
"Sixty to 70 percent of prisoners lack the functional literacy required to read a tenancy agreement, an employment contract, or even the road code. It's no wonder they return to crime after leaving prison."
Speaking to The AM Show on Monday, Mr English said he's seen first-hand what education can do for inmates.
"I've been to the graduation ceremony for one of these literacy courses with some of our hard-core prisoners, and I have to say it was quite a moving experience.
"It's worth having a look at anything that's going to stop the cycle of recidivism."
In 2011, Mr English called prisons a "moral and fiscal failure" and said he hoped the Auckland South Corrections Facility, then yet to be built, would be the last the country needed.
It won't be, with plans for a new block at Mt Eden and 1500 new beds at Waikeria, costing all-up around $1 billion.
"What we are doing is now planning for the future, and we are very deadly serious about family violence and methamphetamine," then-Corrections Minister Judith Collins told RNZ in October.
The ACT policy won't apply to "the worst violent or sexual offenders", and prisoners who can already read and write will be expected to mentor those who can't, if they want to earn a reduction in their sentence.
"This policy would save taxpayer money through reduced sentences and lower rates of recidivism," said Mr Seymour.
"ACT would reinvest these savings into education in prisons, including programmes run by non-government groups like the Howard League for Penal Reform."
Mr English says the policy ties in with the Government's efforts to boost rehabilitation, but isn't sure the public will be on side.
"There's always a very high public sensitivity to reduction in sentences, particularly for more serious crimes. But I think there's a growing realisation we need to break the cycle."
ACT's softening on prison sentences hasn't extended to its three-strikes policy, which remains in place.