Youth detention costs an average of $1.3 million per child per year, or more than $3600 a day, according to the data.
The report stated there were about 860 young people in detention in Australia in 2025, up from 792 in 2020.
Former national children's commissioner and now Justice Reform Initiative spokesperson Anne Hollonds said the record funds are being poured into a system that fails to reduce crime.
"We are spending record amounts on a system that almost all children come back to," Ms Hollonds said in a statement.
"Around 85 per cent of children released from detention return to sentenced supervision within 12 months."
She described youth recidivism rates as a "devastating policy failure" that Australians are paying for.
"Instead of reducing crime or promoting community safety, detention compounds trauma, disconnects children from education, family and community, and increases the likelihood they will continue to commit crimes," Ms Hollonds said.
In Victoria, the cost exceeds $2.6 million per child per year, the highest of any state or territory.
Ms Hollonds took aim at Victorian policies like the "adult time for violent crime policy" targeting 14 to 17-year-olds announced in late 2025.
"In Victoria, youth detention numbers were falling just two years ago," she said.
"Now we are seeing a rapid reversal as punitive policies take hold. This is the same failed path we have already seen elsewhere."
Indigenous children remain over-represented in youth detention centres, the report states.
On an average day, 734 children are imprisoned across Australia, with 62 per cent of those being Indigenous young people.
The number of Indigenous children in detention surged in NSW, up 86 per cent since 2020-21.
In the Northern Territory, 95 per cent of detained children are Indigenous.
Prisons are also becoming more violent for young people, with 36 recorded incidents of injury to a young person in custody because of a serious assault in 2024-25.
This is up from 20 incidents recorded in the 2023-24 period, according to the report.
Ms Hollonds argued more funds should be invested in prevention, early intervention and community-led solutions to keep children out of jail.
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