The finding is contained in a report by the Justice Reform Initiative, an alliance of former parliamentarians, Aboriginal leaders, judicial figures and academics.
It warns efforts to rehabilitate prisoners and prevent reoffending are failing with WA's prisoner population growing by more than 20 per cent over the past decade.
Almost two-thirds of prisoners in WA have been incarcerated before, and that figure increased by six per cent between 2012 and 2021.
The report found the increase in prisoners was "not driven by severity of offending, or crime, but rather by systemic failings and policy and legislative choices that end up funnelling people ... unnecessarily into imprisonment."
"Western Australia's policy response to increasing numbers of people in prison has been to throw more money into the existing criminal justice model, even though all the evidence tells us this model isn't working," Justice Reform Initiative executive director Mindy Sotiri said.
"This report outlines an option for a smarter approach ... to increase investment in community-led supports and services that prevent people from coming into contact with the justice system, and to invest in real diversionary options."
Adult prisoners each cost WA taxpayers about $297 per day, or $108,405 per year, according to Productivity Commission data cited in the report.
Hundreds of millions of dollars have been spent by the McGowan government since coming to office on expanding prisons to address overcrowding.
The government has more recently invested $86 million in the troubled Banksia Hill youth detention centre, with the lion's share going towards security-related infrastructure upgrades.
Staffing and mental health services were also expanded.
WA's incarceration rate of 325 prisoners per 100,000 adults in 2021 was second only to the Northern Territory and well above the national average of 214 per 100,000.
Eighteen per cent of adult prisoners in WA were on remand in 2011 but that figure had ballooned to 31 per cent a decade later.
The McGowan government has sought to reduce the state's high rate of Aboriginal incarceration and funded First Nations-led justice reinvestment projects including Olabud Doogathu and the Yiriman Project in the Kimberley.
Dr Sotiri said those programs were achieving strong outcomes but needed more investment.
"Too many services and programs are under-resourced, unable to meet demand, and often at risk of losing funding," she said.
"It's time to get smart and follow the evidence, adequately fund the services and supports that work to reduce criminal justice contact, and build stronger, safer communities for all West Australians."
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