Government spies were legally required to delete files on internet mogul Kim Dotcom, Prime Minister John Key says.

Crown lawyers have told Dotcom that information he had sought had been "aged off" the system.

He is suing the Government Communications Security Bureau after it was found to have illegally spied on him.

Dotcom said the deletion was contrary to a statement given by Key in February last year.

"This is a spy agency. We don't delete things. We archive them," Key told Parliament.

However, Key today insisted there was a difference between "raw intelligence", which was what Dotcom wanted, and files created by the spy agency.

The law required that the former be deleted (or "aged off") once it was no longer relevant. Dotcom was "quite wrong", he said.

"There aren't files missing," Key said.

"As I understand it, there is raw material that ages off the system and Section 23 of the [GCSB] act demands that ... data that is collected, that's intelligence, over time, if that is no longer relevant then it falls off the system."

Opponents of beefed-up spying powers, introduced last year, had argued that the GCSB should not hold onto to information, he said.

"The great irony is ... now people seem to be saying ... we should be holding onto data forever.

"But they are just trying to join dots that cannot be joined and confuse people. Mr Dotcom is completely and utterly wrong."

Key said he stood by his statement to Parliament.

He was answering allegations that GCSB had deleted footage of him discussing Dotcom at the agency's headquarters. The existence of any video has never been proved.

"It was fictitious and made up by the Opposition ... but if it had been there ... that's not raw intelligence and that would be archived forever," Key said.

Labour's associate security and intelligence spokesman, Grant Robertson, said aged off was a "euphemism" for deleted.

"This may have serious implications for Kim Dotcom's case.

"More than that, it calls into questions claims John Key made in Parliament ... that the GCSB does not delete files."

Dotcom is battling extradition to the US on internet piracy charges.

It also emerged last year that the GCSB had illegally spied on 88 Kiwis, prompting the controversial law change.