There are two answers to this question, and neither of them are nice.
1. We lock them up in mandatory detention as a deterrent to others.
2. For political reasons.
Why should we NOT lock them up?
It is a breach of human rights.
They have done nothing wrong.
Prolonged incarceration causes psychological damage
It is inhumane.
It is very expensive.
It portrays a very negative view of Australia.
In Australia, there is bipartisan support for mandatory detention between the Labor party and the Liberal/National coalition. But they spend a lot of time scoring "political points" off each other on issues like how many boats are coming and how tough their respective policies are.
This is immoral and wrong. It just should not be happending in a society that calls itself civilised.
Australia has had waves of immigration, both "legal" and refugees, including Greeks, Turks, Hong Kong Chinese, Italians, Vietnamese (many in boats) to name a few.
Claims that asylum seekers are a "border security issues" and are "terrorists" have emanated from some Australian politicians. This polarises public opinion and slanders hapless asylum seekers, who of course have no right of reply from behind the razor wire.
We should simply allow asylum seekers to live within our society, assess their claims, and send the cheats home. It is time our politicians stopped grandstanding and breaching human rights and international conventions.
We need leadership on this issue, not gutter sniping and political trench warfare.