Travellers entering New Zealand can now be hit with a $5000 fine if they refuse to hand over their phone passwords under new powers border authorities admit may be unprecedented.

Like in many countries, including Australia, New Zealand's customs department is allowed to search and seize phones. However, until now it has not had the power to make someone unlock their digital devices.

"We did consult with other jurisdictions about their thresholds for policing electronic devices at the border but we are unaware of other countries having legislated for a similar penalty," a customs spokeswoman said in a statement.

The new law, which came into effect this week, means that if officers at the border ask for a password, PIN or fingerprint for a laptop, tablet or phone they think might contain illegal materials, refusing is a fineable offence.

But the department says the number of devices checked is "very low", with 537 examined in 2017 out of 14 million travellers.

"The shift from paper-based systems to electronic systems has meant that the majority of prohibited material and documents are now stored electronically," the spokeswoman said.

Authorities say phones the searches will only include file-by-file checks of content stored on the phone, not items held online.

The move has New Zealand's Council for Civil Liberties concerned.

Spokesman Thomas Beagle said there appeared to be no way to challenge what the "reasonable suspicion" required for a preliminary search entailed, and the law would undermine privacy.

"Nowadays we've got everything on our phones. We've got all our personal life, all our doctors' records, our emails, absolutely everything on it. And Customs can take that and keep it," he told Radio NZ.

Serious criminals would be "mad" to carry incriminating material on their phones, Beagle said.

Comment is being sought from New Zealand's customs minister.