Prime Minister Bill English expects new legislation governing New Zealand's spy agencies will pass smoothly through parliament this week.

The house is set to debate the second reading of a bill that overhauls that control how the Security Intelligence Service (SIS) and Government Communications Security Bureau (GCSB).

The bill follows a report which suggested changes to how warrants are obtained, and favoured limiting the agencies' spying powers to suspected cases of terrorism, violent extremism, and espionage.

The government believes the new, "fairly demanding" rules will increase the transparency and accountability of the SIS and GCSB.

"There is now much more oversight of the operations of the agencies, and a stronger requirement on them to be clear about what they're doing and why," Prime Minister Bill English said.

English says the two departments will need greater funding in order to meet their new obligations.

"They've needed more funding to be able to meet the upgraded compliance, and they just have to do a lot to more to make sure they comply with what is now a fairly demanding law," he said.

In its Budget last year, the government set aside almost $180 million in additional funding over four years for the intelligence sector.

Opposition parties, however, are pushing for greater representation, saying membership of the Intelligence and Security Committee should be increased.

"That's been a long time coming," Green Party co-leader James Shaw said. "I hope that manages to pass through the house."

The annual report released by the SIS, the country's external security agency, stated that the current anti-terror environment in New Zealand continues to be dominated by the influence of the Islamic State.

It warns the group's propaganda output and pervasive social media presence is recruiting people to its cause here.

The SIS says it had between 30 to 40 people on its counter-terrorism risk register last year - people it describes as determined to represent an actual or potential threat to the country.

And it appears to be an area the SIS intends focusing on - the agency says it's to make further investments over the next 12 to 24 months in investigating violent extremism.

It was revealed last week that the SIS had played a role in preventing a man with with terrorism-related convictions from entering the country in 2015.