Bonus for Vic prison if reoffending cut

The builders and operators of a new Victorian prison will get an extra $2 million a year if they cut reoffending rates.

The GEO consortium will get the bonus payment if it cuts recidivism at the new Ravenhall facility by 12 per cent a year compared to the overall prison system.

The target for indigenous prisoners is a reduction of 14 per cent.

Corrections Minister Wade Noonan said work has begun on the $2.5 billion, 1000-bed prison in Melbourne's outer west.

"Given the forecast surge in prisoner numbers, we will need this prison. An extra 1200 offenders have entered the prison system in just the past two years," Mr Noonan said on Thursday.

He did not detail how GEO planned to tackle the recidivism problem.

But Mr Noonan said the number of prisoners coming back into the system was too high, so they needed a focus on programs that would help keep them from returning.

Victoria's recidivism rate is 39.5 per cent and is likely to go higher.

Mr Noonan said GEO would work with offenders while they were in jail, and also during their transition back into the community.