"It's not ideal in some situations, but if you do it well, it's fine."
The double-bunking was likely to be introduced at Hawkes Bay Prison, which had the most capacity.
Corrections was also delaying closing prisons, including Waikeria in the Waikato to cope with growing prisoner numbers.
Mr Smith stood by the decision to close jails while the prison population was growing, saying some older institutions were "inhumane" and "dangerous".
Prisons at New Plymouth and Mt Crawford were built more than 100 years ago and were not fit for the modern focus on rehabilitation.
Another 270 prison beds would be available in April following renovations at various jails.
The prison muster rose to 9360 last month, contrary to long-term forecasts of a fall in prisoners, and is expected to rise further.
Mr Smith said the core drivers behind the increase were alcohol and drug dependency and gang membership, which kept people in a cycle of crime or prevented rehabilitation.
Although the long-term prison population was relatively stable, the remand population had grown significantly.
Mr Smith said sentencing of domestic violence offenders had been more vigilant, and these people were spending more time on remand.
Corrections Minister Judith Collins boosted the Corrections Department's budget by $15 million in December to increase staffing levels in prisons.