The New South Wales government is advising local councils to invoke terrorism fears to keep the location of potentially lethal flammable cladding secret from the public.

The 2017 Grenfell Tower tragedy in London and 2014 Lacrosse fire in Melbourne have prompted widespread fears about flammable cladding in buildings across Australia.

In NSW, a taskforce has spent two years auditing 185,000 building records to understand how widespread flammable cladding is. Laws have been introduced requiring the owners of some buildings with external cladding to place themselves on registers accessible to local councils and the state government by February.

Members of the public and the Greens MP David Shoebridge have sought access to those registers through the state’s equivalent of freedom of information laws.

But Guardian Australia has obtained an internal missive sent by the NSW government to local councils last month warning them the cladding information is “highly sensitive” and advising them the release of the documents may be contrary to the public interest.

Councils were advised to “consult” the planning department before making decisions, and were given examples of three common reasons to reject requests: the potential to affect property prices; to derail the taskforce’s work; or to create a risk of “terror” and arson.

In one recent case, the state government cited all three in advising City of Ryde not to release cladding registers. The council rejected the concerns, and on Tuesday decided to release the register. The council’s decision stated that the NSW government did “not include any corroborated reasons why disclosure would reasonably be expected to result in an act of terrorism”.

“The [Department of Planning, Industry and Environment] has noted in their objection that the possibility of an attack on a building that has been identified as having an amplified danger is very real and that if the list of buildings … that may have flammable cladding were made available to the public, this has the capacity to enlarge the risk of arson and terrorist attacks,” the council’s decision-maker wrote.

“I am not qualified to determine whether disclosure of the information could result in an act of terrorism or whether it has the capacity to enlarge the risk of arson and terrorist attacks, however the DPIE’s representation does not include any corroborated reasons why disclosure would reasonably be expected to result in an act of terrorism.”

Shoebridge, who lodged the City of Ryde request, said there was little doubt the properties identified would take a temporary hit in value.

But he said the release of the documents was critical to improving the response to cladding, and criticised the government for attempting to “gag” councils by raising the prospect of terrorism.

“The state government is making unsupported and exaggerated claims about terrorism and arson threats in a thinly veiled attempt to scare councils away from releasing information about combustible cladding,” Shoebridge said.

“People living in these buildings have a right to know if they’re at risk. Anyone thinking of renting an apartment or buying an apartment also has a right to know and it’s about time the state government understood that.”

A planning department spokeswoman said it was acting on the advice of emergency services, which “counsel against the public release of this information”.

“Other states, such as Victoria, have taken a similar approach to the public release of cladding information,” she said.

“The NSW government puts the safety of its communities first.”

NSW Fair Trading offers separate advice for residents wanting to find out whether their building’s cladding is safe.

A similar issue was experienced in Canberra during the Mr Fluffy asbestos scandal in 2015. The ACT government’s release of the locations of 1,023 asbestos-affected homes angered some home-owners, but was viewed as necessary to fully inform and protect the public.