THE country's intelligence watchdog, Ian Carnell, has called on the Federal Government to make substantial changes to anti-terrorism laws, saying some of them can hinder counter-terrorism efforts by unnecessarily antagonising Muslims.

In an interview with the Herald, Mr Carnell, the Inspector-General of Intelligence and Security, said there was a strong case for reviewing the strict rules that keep "national security" information secret in trials.

"My belief is that a key test for liberal democracies in the area of counter-terrorism is a willingness to revisit what was introduced when there was a sense of urgency and, if necessary, modify the measures to ensure effectiveness, balance and proportionality," he said.

"This is particularly so if some aspects may be counter-productive, such as adding to the sense of alienation and discrimination which members of the Muslim communities can suffer."

An alienated Islamic community not only provided more fertile ground for violent extremists to emerge, but discouraged Muslims from providing counter-terrorism authorities with vital information.