The Government is struggling to convince United Future and New Zealand First to support its plan to extend the powers of the country's electronic spy agency.
United Future leader Peter Dunne says the Government Communications Security Bureau (GCSB) should stick to spying on foreigners.
Mr Dunne said he is worried about the blurring of the boundaries between the GCSB and the Security Intelligence Service, which is responsible for internal security.
"I think that boundary needs to be clear and I don't think the GCSB should under any circumstances have a role in any form of domestic security operation."
Mr Dunne says he will decide whether to support the legislation based on what changes are made before it is referred back to Parliament.
New Zealand First leader Winston Peters accepts that domestic terrorism could be a problem and that the country's intelligence services need to be given the powers to combat it.
However, he says not enough work has been done on the plan to ensure that the country has proper workable security measures to defend the security of New Zealanders.
Despite the Government likely to need New Zealand First's support to get the bill through Parliament, it has made no approach to the party about discussing changes that would make the legislation more acceptable.
In a submission on the bill, the New Zealand Law Society says the GCSB will be changed from being a foreign intelligence agency to a mixed foreign and domestic agency with the power to spy on New Zealanders.
Dr Rodney Harrison, QC, wrote the submission and says the legislation enables the bureau to spy on citizens and residents in a way not previously contemplated.
The society told Parliament's Intelligence and Security select committee on Monday there is no clear justification for the proposed changes. It says it is inconsistent with freedom of speech and freedom from unreasonable search and seizure guaranteed under the Bill of Rights.
Prime Minister John Key argues that the bill simply clarifies what the GCSB already does.
"I do not believe it expands the mandate of the GCSB; I think what it does do is clarifies fully in the law what has been the historical behaviour of GCSB under what they believed was their legal authority.
"And the bottom line is, that because of difficulties in interpretation in the law, we need to clarify that law, but this is something that has been going on for a very long period of time under previous governments."
Labour Party leader David Shearer says the planned law change is a knee-jerk reaction.
"I don't believe the Government has made the case for having this legislation and, secondly, it shouldn't be rushed through as it is at the moment.
"We've always argued for a full and independent inquiry across the Parliament which would actually look at the status of our intelligence agencies as they are and make the case for whatever legislation we need. But this is a knee-jerk reaction."
Mr Shearer says if Labour leads the Government after the 2014 election it will initiate a wide-ranging review of the country's intelligence services.