New powers to allow police and intelligence agencies to intercept encrypted messages are expected to pass Federal Parliament this week.

Key points: Authorities have warned 95 per cent of people watched by domestic spy agencies are using encrypted messaging apps

Authorities have warned 95 per cent of people watched by domestic spy agencies are using encrypted messaging apps Shadow Attorney-General Mark Dreyfus said the Coalition had made a number of concessions

Shadow Attorney-General Mark Dreyfus said the Coalition had made a number of concessions He said the deal will improve oversight and accountability to prevent unintended consequences

The Federal Government has warned that 95 per cent of people watched by Australia's domestic spy agencies are using encrypted messaging apps.

The Coalition and Labor have been locked in negotiations over the contentious legislation for weeks, but it appears an in-principle agreement has been reached that addresses Opposition concerns.

Federal Labor wanted to ensure the interception powers could only be used to investigate serious crimes like terrorism and child sex offences.

Attorney-General Christian Porter said Labor had compromised on that position to include serious offences like drug and gun crime.

The Opposition was also worried the legislation was too broad and wanted to restrict the powers to federal agencies, rather than state police.

"At the beginning of this week, the situation we faced was a proposal from the Opposition for an interim bill that would have removed state police completely," Mr Porter said.

"They would have also narrowed the range of offences to only two categories of offence and they were insisting, in our observation, a very slow process.

"I am incredibly pleased for the Australian people that it appears we will have the passage of this very important bill finalised and through both houses of parliament by the end of the week.

"We have been told repeatedly by our security agencies that Christmas is a very difficult time for law enforcement."

'This bill is far from perfect'

Shadow Attorney-General Mark Dreyfus said the bill was not perfect but changes had been made to improve oversight and accountability.

In the wake of the Bourke Street attack in Melbourne last month, the Coalition had been pressuring Labor to support the legislation before Parliament rises on Thursday.

"It appears the Government will agree to proposals by Labor that will ensure there is better oversight and limitation of the powers in this bill, and better safeguards against potential unintended consequences," Mr Dreyfus said in a statement.

"Let me be clear — this bill is far from perfect and there are likely to be significant outstanding issues.

"But this compromise will deliver security and enforcement agencies the powers they say they need over the Christmas period, and ensure adequate oversight and safeguards to prevent unintended consequences while ongoing work continues — just as Labor proposed."