Prime Minister John Key says spy agency the GCSB should be able to continue to provide surveillance for the SIS under the right conditions and with the right oversight.
But he did not believe the level of oversight was high enough at present.
He said he would have proposals by next week on the next steps including how to beef up the level of oversight.
At present the oversight is conducted by the Inspector General of Intelligence and Security, retired High Court Judge Paul Neazor.
Speaking in Shanghai where he was leading a trade delegation, Mr Key spoke about the report released yesterday by Secretary for Cabinet Rebecca Kitteridge which suggests a long-established practice by GCSB of conducting surveillance for other agencies of state, such as the police, was unlawful.
Crown Law has previously given such practices the legal tick but has changed its mind and said it could be unlawful - in at least 88 occasions since 2003.
The GCSB focuses on international intelligence and the SIS on domestic.
Mr Key he wanted the right to provide what he termed "agency support" to continue.
"The reason for that is that their technical expertise is very high and the cost of replicating that in a lot of other agencies would be very high."
One of the conditions of allowing the GCSB to continue to support the SIS on cases is that it would have to comply with SIS criteria - which meant that all cases would have to have a warrant from the commissioner of security warrants."
Some of the "support" given to date by the GCSB to other agencies has been for work that did not have a warrant.
Mr Key also said he did not believe the level of oversight of the GCSB by the Inspector General of of Intelligence and Security was high enough.
"I don't believe the level of oversight is high enough. He is the big "He is the big control chief that looks within that organisation...and we need to make sure it is at a higher level."
"With all the knowledge we now have and the importance of that role, it is quite clear to me as the minister, that Parliament needs to ensure that the inspector general has a broader mandate and better oversight."
In the case of the Inspector General, he believes he has fulfilled his requirements as established by the law and that is probably right.
"But what I would say is that the oversight that is necessary, now that we have the opportunity to go much more deeply into the operational workings of the GCSB, indicate to me that a higher level of oversight is required."