Legalising cannabis could be worth $240m to New Zealand - top economist

New analysis suggests the Government could make hundreds of millions of dollars in tax revenue if cannabis is fully legalised.

A report has found that a reform package, including the decriminalisation of all drugs, would more than pay for itself in economic and health benefits.

The Drug Foundation has made no secret it wants drug reform, but it's now brought in top economist Shamubeel Eaqub of Sense Partners to back its case.

"Who doesn't know somebody who's smoked pot? Everybody knows somebody... and if you haven't done it, you're missing out," he says.

Mr Eaqub looked at the cost benefit of legalising cannabis and decriminalising the possession and use of all drugs. His report's found such a reform could net New Zealand $240 million in tax revenue.

Close to $13 million would be saved by treating drugs as a health concern rather than a crime, he claims - and there could be $83 million in social savings, for example because there'd be fewer people in prison.

"Most of the savings comes from the criminal justice system, and on average the cost of putting someone in health is half of that of locking them up and putting them through the court and prisons," says Mr Eaqub.

The Drug Foundation also wants to pump an extra $150 million into addiction treatment, drug education and harm reduction - and it says that would more than pay itself off.

"The returns of the investment, are somewhere between one-and-a-half and five times," says Mr Eaqub.

Health Minister David Clark says there's merit in considering it.

"Of course we're not going to rush into anything - we want to talk seriously though the issue, because we're focused on harm re-education."

But National isn't convinced, says its Justice Spokesperson Michael Woodhouse.

"If they are talking about decriminalising class A, B and C drugs, I'd be fairly confident if I was to take that back to the National caucus the reaction would be 'No way!'"

The Government has promised a referendum on legalising cannabis on or before the next election.