A bill that would have extended powers of video spying and conversation bugging to 70 Government agencies has been significantly tightened so it will apply only to a handful of agencies such as the police.
But civil libertarians say all the original concerns are still valid.
The justice and electoral select committee has released an interim report on the Search and Surveillance Bill and has tightened the rules on how surveillance warrants will be granted.
It has invited further submissions by September 3.
The bill was previously criticised as enabling Government agencies to use surveillance warrants.
Committee chairman Chester Borrows said the amended bill would exclude all agencies from these powers apart from the police and a few others.
Under the changes, warrants for surveillance will be granted only to investigate offences that carry at least a seven-year prison term, and with the approval of the Ministers of Justice and Police.
But Council for Civil Liberties spokesman Michael Bott said making warrants subject to ministerial approval did not exclude any of the other agencies, and it was easy to add charges to an investigation to reach the threshold of a seven-year jail term.
Mr Bott further criticised the bill for legalising covert recording of a conversation with a consent of only one person in the group, which could invite police to infiltrate and spy on activist groups.
The bill will also allow surveillance activities for 72 hours without a warrant, including if an officer has "reasonable grounds" to suspect that an offence punishable by 14 years or more in prison is about to be or is being committed; or an offence in relation to arms or certain drugs; or to avert an emergency.
Labour MP David Parker said the bill had been tightened in other areas, including scrapping residual warrants altogether, which could have allowed police to use new surveillance technology - such as heat detectors - under looser restrictions.
Mr Bott and Mr Borrows will debate the bill at a public meeting in Wellington on August 30.
Changes to spy bill still draw criticism
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