Key says extension of spies' powers follows the discovery of attempts to raid NZ weapons-related science.
Prime Minister John Key yesterday revealed intelligence agencies have detected attempts by hackers to steal New Zealand technology that could be used to create weapons of mass destruction.
Mr Key made the claim to reinforce the need for law changes to allow electronic eavesdropping on New Zealanders by the Government Communications Security Bureau.
While the terrorism threat in New Zealand had remained low there were people within the country with links to offshore terrorist groups.
Other threats to national security had continued to intensify, he said.
"There have been covert attempts to acquire New Zealand science and technology for programmes relating to weapons of mass destruction or weapons delivery systems ... I can't detail the success or otherwise of those incursions."
Mr Key said the law changes "strike a balance between permitting necessary intelligence activities and the rights of New Zealanders to privacy".
The changes were prompted by Cabinet Secretary Rebecca Kitteridge's GCSB report last week. It found the bureau may have acted unlawfully when it spied on 88 New Zealanders over the past decade when assisting the SIS and police.
"We intend to make it clear the GCSB can undertake activities on behalf of other named agencies where those agencies can lawfully undertake those activities," Mr Key said. "This includes the other agencies' lawful investigations of New Zealanders."
He also unveiled proposals to strengthen oversight of NZ's intelligence agencies by beefing up the responsibilities, capability and reporting requirements of the Inspector of Intelligence and Security.
He said Inspector Paul Neazor had decided not to seek another term.
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Oversight of intelligence agencies would also be improved through public reporting by Parliament's intelligence and security committee which is made up of party leaders.
Mr Key said he would brief those leaders on the changes this week.
The GCSB's assistance to the SIS and police, which has been on hold since it emerged the bureau had been spying illegally on German internet entrepreneur Kim Dotcom, would only resume when the legislation was passed in the second half of the year.
Other work included changes to legislation around telecommunications interception and network security which would be announced this week.
Mr Key confirmed an investigation into how Ms Kitteridge's report was leaked to the media would go ahead and would be led by former top public servant David Henry.
Labour Party leader David Shearer, who this week said he would support the type of changes announced yesterday only after a full independent inquiry into the intelligence agencies, was sticking to that position last night.
"We've been calling for a full independent inquiry for some time now and I can't understand why the Government is refusing to have one."
He was also sceptical about Mr Key's claims about weapons of mass destruction.
"The trouble is John Key comes up with all these comments but is never able to substantiate them."
Green Party co-leader Dr Russel Norman also repeated his call for an independent commission of inquiry into the GCSB, "before expanding their role to make it legal for them to spy on New Zealanders".