The Australian Institute of Health and Welfare says almost one-third of prisoners entering jail are already mentally ill.

Jail authorities say that is consistent with what they are seeing in custody, and some are calling for greater interaction with family members to help with the problem.

The institute collated statistics from its National Prisoner Health Census in 2010.

It finds about one in every three prisoners reported, when entering prison, that they had been told by a doctor, a nurse, psychiatrist or psychologist that they had a mental health disorder.

The report's author Tim Beard says that is two-and-a-half times the rate of the general population.

"I think the overall mental health of prisoners is fairly poor, particularly when they first come into custody, because they've either been experiencing untreated mental illness in the community or experiencing drug and alcohol problems," he said.

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"And so when they first arrive, there's a lot of depression, a lot of anxiety and also untreated psychotic illnesses."

The report also found other issues.

"The medication rate was quite high compared to the population. So we found that 16 per cent of this population were actually on medication for a mental health disorder," Mr Beard said.

"We also found that on a scale of levels of distress, the very highest levels of distress was reported by 14 per cent of prison entrants.

"And that's very much related to mental health issues as well."

Forensic psychiatrist Craig Raeside works in the South Australian prison system.

"One of the concerns I have is that there tends to be a medicalising of their problems," he said.

"That is that they see the doctor, they're referred to the psychiatrist and they're basically treated with medication and other forms of treatment such as counselling and psychological therapies not usually available in many of the prison settings."

South Australia's corrections chief executive, Peter Severin, says the report confirms what he is seeing in that state.

"We do have a quite large number of offenders coming into the system with mental health problems," he said.

"They're not necessarily psychotic or require the accommodation in a forensic mental health facility but nevertheless in particular through drug-induced psychosis we do have a growing number of people who do have mental health issues."

'Sense of normality'

He says it is difficult to judge whether people are being locked up because they are mentally ill.

"Obviously people are not locked up at the whim of anybody, they're locked up as a result of the courts finding that they obviously need to on remand or indeed once they're convicted for an offence they're sentenced to a term of imprisonment," he said.

"But of course we certainly find that people are often on remand because it is difficult for them to meet the conditions for bail."

The report does not include figures from Victoria or New South Wales.

But Brett Collins, a former prisoner and a member of Justice Action in NSW, says it s consistent with what is being seen in NSW.

"I went to jail as a student and I was just amazed, I looked around me and I discovered all these, I thought, normal people and I thought why are they in jail; what's happening here?" he said.

"But what in fact I found was that these people, they had their problems outside, they didn't have a chance to properly deal with them, and so inside jail they actually got a sense of normality."

He believes families are underutilised in helping prisoners with mental health problems and rehabilitation.

Mr Severin says he has proactively supported family involvement in the South Australian system.