Senior cabinet minister Mathias Cormann has accused Labor of siding with terrorists, as debate over deadlocked encryption legislation takes an ugly turn.

Senator Cormann says the opposition is playing games with laws designed to give Australian security and police agencies powers to access encrypted communications.

A bipartisan intelligence and security committee looking into the new powers has failed to reach an agreement on a way forward - the first impasse of its kind in more than a decade.

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The legislation is aimed at preventing terrorists, child sex offenders and serious criminals from communicating in secret.

However, Labor shares the concerns of technology giants and industry groups who fear the laws could expose Australia to security breaches and hacking from nefarious actors.

"We're very disappointed Labor is playing games with this," Senator Cormann told Sky News on Sunday.

"To think that Labor would want terrorists to be able to communicate with each other ... I think that Labor are using excuses."

Senior Labor Senator Penny Wong said the prime minister was seeking to create a fight over the encryption laws to distract from the government's problems.

Senator Wong said the bill as it is currently drafted would make Australia less safe.

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Labor has offered to pass an interim bill by Thursday to give intelligence agencies temporary powers to better monitor terrorists.

However, Senator Wong said Scott Morrison was consumed by behaving like a "partisan player" on national security.

"We believe the prime minister is compromising Australia's national security and he should stop playing politics with national security to try and get around the fact that he has a problem in his party room," she told the ABC.

Assistant Home Affairs Minister Linda Reynolds said it was vital for the legislation to pass before the holidays.

"Christmas is a heightened security issue for us and we need to make sure people are as safe and as secure as possible," Senator Reynolds told reporters in Queensland.

"It is the lives of Australians at risk, because the threat is real."

Australian Federal Police Chief Andrew Colvin advised the committee examining the laws that more than 90 per cent of telecommunications being lawfully intercepted by the AFP now use some form of encryption.

"What this bill does is give police a fighting chance," Mr Colvin said.