Remand prisoners awaiting trial will be able to apply to live at home under 24-hour monitoring by police from later this year.
The new electronic bail scheme will run in a similar way to home detention, where people wear an electronic bracelet that sets off an alert if they leave their house.
Police received $5 million for the project in yesterday's Budget and will receive a further $2.6 million in the coming financial year, and $3.2 million in subsequent years to pay for theprogramme.
Police will assess applicants for risk to the community but judges will make the final decision on whether to grant electronic bail.
Superintendent Graham Thomas, national manager of the Police Prosecutions Service, said electronic bail could free up between 100 and 120 prison beds but the figure would not be clear until applications were made.
Mr Thomas said electronic bail was not a "soft touch" and the system was inevitable.
"The fact that technology allows this and it's more fully tested and accepted means that it ... would become a more widely used tool."
Mr Thomas said police would assess applications using existing bail criteria, the location of the home and who else lived at the address.
"We have to then go through a bit of a scan about the nature of the offence and the person, and what that might mean for the person being back in the community," Mr Thomas said.
"There are three key things we want to ensure we cover off as fully as possible, and that is around looking after victims, community safety generally, and that includes the potential for reoffending or absconding, and the integrity of the court process.
"We're going to be very careful about how we ... develop the assessment criteria and then the assessment processes so we can give the court good information.
"There are no absolutes but I think the fact [police] are controlling it will be a plus."
The Sensible Sentencing Trust was not too concerned about electronic bail as long as it was not granted to recidivist offenders or a violent offender.
"They're obviously trying to reduce the prison population," said trust spokesman Garth McVicar.
He said the focus had to be on public safety and not off-loading people from the prison system.
"Providing it's not a violent offence or the safety of the community is at risk then we don't have too many concerns," he said.
Criminal Bar Association president Peter Winter said the scheme would apply to offending where the court wanted people "off the street", or people who tended to breach bail.
"Sometimes people are remanded in custody because the courts are not convinced the bail arrangements for them are suitable, and if this will provide a further security aspect so far as the courts are concerned, then it is a positive thing both for people on remand and also for the state."
Mr Winter said police would be able to respond quickly to a breach of bail and it would free up time spent carrying out bail checks.
He would not like to see "slippage" where electronic bail is imposed on people who may receive ordinary bail.
Electronic bail has been available in the past but at a cost to the defendant. A man awaiting trial on charges of methamphetamine possession and supply was able to abscond while on electronic bail in 2001.
Police will employ 30 extra non-sworn staff to manage the scheme but will seek private tenders to provide the monitoring service.
<i>Budget 2006:</i> $10.8m to start electronic bail scheme for remand prisoners
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