Embarrassed Australian prison bosses will hold crisis meetings today after an armed inmate high on the drug ice posted video footage revealing lax security in the maximum security facility.

Prisons Minister David Elliott said he was "horrified" at the security breach, which included the Parklea prison inmate filming his stash of knives and claiming corrupt guards provided them to inmates.

"This place is a deadset joke. Right now in my cell I have a mobile phone. Why have I got a mobile phone? It's because screws bring mobile phones into the jail for money," the inmate, identified only as Nick, boasts in the video which was uploaded to YouTube on June 29.

At one point in the video Nick slashes the wall with the knife and says: "That's just an example of what it can do to your throat. OK. That's a slasher."

The video was filmed inside the maximum security Parklea Correctional Centre in Sydney, the Daily Telegraph reported.

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The prison is run by a private operator, GEO Group, which could face penalties after the embarrassing video. Its contract is now being reviewed and meetings are scheduled for today.

Elliott said he was "horrified" when he saw the video and immediately ordered an investigation.

"No stone will be left unturned. I have asked Corrective Services NSW to review the contract to see what penalties could be imposed if there has been a failure by the operator."

Prison staff raided Parklea cells on Saturday after the video was discovered.