Labour is considering its range of options in the wake of allegations and claims made this week in Nicky Hager's new book, Dirty Politics, says party leader David Cunliffe.
Among other things, the book - published on Wednesday - implicates staff within the National Party over the release of potentially damaging information on the Government's opponents.
It claims a member of the staff of Prime Minister John Key accessed Labour Party computers and passed information on to Whaleoil blogger Cameron Slater.
In Wanganui last night Mr Cunliffe said what he had read of the book so far had left him "deeply concerned".
"And the more I read, the sadder I feel that New Zealand politics has come to this.
"This is not why I got into politics and not why most New Zealanders would expect people to get into politics and do either," he said.
Asked if he thought the Prime Minister needed to call for an inquiry into the allegations made by Hager, Mr Cunliffe said his party was considering its options.
"I think that Mr Key has breached the responsibility of his office, both as prime minister and Minister of the SIS. It doesn't get more serious than this."
And he said the Prime Minister's response when questioned about the book "has been nothing short of gob-smacking".
"He's tried his usual trick of shrugging and walking away, and that is not going to work this time.
"These are not just allegations - there is evidence by emails from his office and from the website of his sludge merchant, Cameron Slater.
"That implicates the Prime Minister, who apparently talks to that blogger regularly and routinely, so it's time for John Key to show some character and stand up for the responsibility of his office and what he's going to do about it," Mr Cunliffe said.