China is listed as an “extreme” threat on a secret country-by-country counter-intelligence index compiled by Australia’s domestic spy agency.

ASIO’s Deputy Director-General Counter-Espionage and Interference Peter Vickery told parliament today the level of espionage and foreign interference in Australia was now worse than at the height of the Cold War.

“We do have examples, current examples of (countries) where the threat level is at extreme,” Mr Vickery said.

“That means it's happening now.”

Mr Vickery refused to say more about the index or publicly name the countries that posed the greatest threat because of the sensitivity of the information.

9NEWS has been told that the index has five levels – negligible, low, medium, high and extreme – and a government source confirmed that China topped the ASIO’s list as the most extreme threat to national security.

ASIO lists China as an "extreme" threat to national security. (AAP)

Mr Vickery warned that foreign espionage and interference was not aimed solely at the political level but “across our society as a whole” and he sketched a series of case studies to demonstrate the nature of the threat.

“A foreign intelligence service used a long term Australian sleeper agent to collect information about the diaspora community in Australia,” he said.

“We know that some foreign intelligence adversaries not only recruit officials in a public service sense but they also seek to recruit and cultivate public officials: in other words, politicians.”

ASIO was testifying before a parliamentary committee examining proposed laws that would impose stiff penalties for spying and acting covertly on behalf of foreign interests.

The laws have been attacked as too sweeping by universities, charities and the media.

The intelligence watchdog has also voiced concerns about their scope.

But former Greens candidate turned academic Professor Clive Hamilton has studied China’s espionage and influence campaign and he told that committee that, with amendments, the laws were essential.

“Eighteen months ago I couldn't have imagined me taking this position and defending the US alliance,” he said.

“But the evidence is overwhelming.”

And there's a reason why this nation is a target.