Proposals to give New Zealand's intelligence agencies greater abilities to spy on its people have been welcomed by Prime Minister John Key, but described by the Greens as "one of the most significant erosions in New Zealanders' privacy in recent times".

The report into the country's intelligence and security laws has recommended that a single piece of legislation be established to cover both the Government Communications and Security Bureau (GCSB) and the Security Intelligence Service (SIS) - and its authors would have recommended a merger of the two agencies if they had been allowed.

The report, from former deputy prime minister Sir Michael Cullen and Dame Patsy Reddy, was commissioned by the Government following revelations and damning reports about the country's spy agencies in recent years.

FILE A report into the laws governing New Zealand's spy agencies says there should be a single piece of legislation covering both the GCSB and SIS.

The report said there was a "lack of clarity" about how existing laws covered the agencies' work, while there was a lack of comprehensive oversight to authorise their activities.

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FAIRFAX NZ Sir Michael Cullen said he would have supported a merger of the GCSB and SIS had he been allowed to.

It recommends the removal of current restrictions on the GCSB intercepting New Zealanders' private communications.

Instead, protections should be implemented through stronger government oversight, with some form of authorisation required for all of the agencies' intelligence and security work.

"The agencies need to be able to combine their skills and knowledge to provide the information that the government requires, and the legislation should facilitate that."

However, it says warrants for spying on New Zealanders should only be allowed for the purposes of protecting the country's national security, rather than its "economic and international well-being".

The report proposes a three-tier authorisation framework for the agencies' intelligence and security activities, with the highest scrutiny reserved for otherwise unlawful activities targeting a New Zealand citizen, permanent resident or organisation, which would require the approval of both the Attorney-General and a judicial commissioner.

It says there should be an override of the authorisation process for urgent or emergency situations, allowing the agencies to obtain a warrant with only the Attorney-General's permission, or an agency director if a minister could not be contacted.

If that happened, the Chief Commissioner should be notified immediately, with the warrant able to be cancelled at any time.

'VERY VALID POINTS'

Prime Minister John Key said the report made "some very valid points" about the need to strike a balance between national security and the right to privacy.

"I think what the report's trying to indicate is we live in a world of changing national security requirements, a world that presents a few more risks to New Zealanders, and I think they're arguing that if the legislation was changed...we could do a better job of protecting New Zealanders."

Key said while the report could be seen as recommending an expansion of the GCSB's current authority, it would be in a "very narrow set of circumstances with a very increased level of oversight".

While a merger of the SIS and GCSB was "theoretically a credible option", it had been ruled out in the terms of reference because he believed neither National nor Labour would want to support that change.

Key denied there were wholesale problems with the 2013 spying laws, saying the report had found "isolated examples" where the GCSB felt unable to work on certain activities due to its conservative approach.

New legislation covering the recommendations would likely come to Parliament in July, he said.

'SIGNIFICANT EROSION IN NEW ZEALANDERS' PRIVACY'

Labour leader Andrew Little said he "certainly [saw] some sense" in the recommendations relating to a single piece of legislation.

However, he had some concerns about whether the changes to GCSB's ability to spy on Kiwis was an expansion of its powers or "confirming what they've said they already do", as well as providing greater access to government agencies' databases.

There is a lot of data held by, certainly Customs and Immigration, that is just about perfectly innocent civilians, so I'm not quite sure therefore what the justification is for wholesale access to that data."

Green Party co-leader Metiria Turei said the report's recommendations would represent "one of the most significant erosions in New Zealanders' privacy that we've seen in modern times".

Turei said having one piece of legislation for both agencies would effectively result in their merger, when there should be a "bright line" between the domestic work of the SIS and the GCSB's role sharing intelligence with foreign countries.

The GCSB had already been "quite liberal and loose" with their existing activities, and they should not be given more powers until it was clear they would follow the law.

"More spying on New Zealanders does not make us more free or more safe," Turei said.

She supported expanding oversight of the agencies, and backed an increase in the size of the intelligence and security committee, which she said should include all party leaders.

'CONTRADICTIONS AND INCONSISTENT DEFINITIONS'

Cullen said the establishment of a single act covering both agencies was the "central recommendation" of the report.

Existing laws were outdated and confusing, making it difficult to understand what the GCSB and SIS could and couldn't do.

"It leads...to a lot of contradiction, inconsistent definitions, unclear interaction between the two at a time when the functional division between SIS and GCSB is inevitably becoming more and more blurred."

Cullen said spying laws passed in 2013 to allow the GCSB to spy on New Zealanders had not solved the problem, with a lack of legal clarity and "some pretty condemnatory reviews" in recent years making the agency "extremely risk-averse".

Removing all restrictions on spying on New Zealanders, rather than adding specific exceptions, was the only way to solve the issue, he said.

"If you try to graft on some exceptions...you simply end up with more contradiction, more conflict, more uncertainty about what it is you can do."

TERRORISTS AND PAEDOPHILE RINGS

Examples of where the GCSB could possibly obtain a warrant to spy on New Zealanders included suspected terrorist activities and serious crimes like paedophile rings, he said.

Cullen denied the report proposed a "vast extension of power", saying it was simply making clearer what the agencies could do, while strengthening checks and balances on their activities.

Cullen said the terms of reference for the report excluded a merger of the two agencies, but it was an idea that would have won his support.

"If we had a blank sheet on that matter, quite probably we'd have recommended a merger of the two agencies, because technologically, increasingly it makes no sense, and I think the next review in five to seven years might well come to that conclusion."