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“It is an enormous expansion of the range of entities, in Australia and overseas, that can be compelled to provide assistance of almost any type – including building new capabilities to allow enforcement agencies to circumvent encryption," said Communications Alliance chief executive, John Stanton.

He said the spyware scenario could include compelling local telco providers to install this software on customers' mobile phones.

"The new rules explicitly say they do not wish to create a backdoor, but they will still weaken the security of messages," said Fitch.

Like many critics of the legislation, Fitch warned this "weakness" would increase the
threat of non-state actors, like hackers, being able to access these messages.

"We believe a debate regarding law enforcement and the rise of encryption is necessary in most developed markets, but Australia’s unilateral decision is not the right way to proceed, and will have an overall negative impact on security services."

The Minister for Home Affairs Peter Dutton sought the new powers on behalf of Australia's security agencies in response to the rising use of encryption by criminals.

"Criminal syndicates and terrorists are increasingly misusing and, indeed, exploiting these technologies," Mr Dutton said in a speech in September introducing the bill to Parliament.

Labor MPs are already insisting on major changes to the encryption regime that Opposition Leader Bill Shorten backed in a late deal with the Morrison government last Thursday.

Minister Dutton confirmed this week that the government will not accept all of Labor's amendments to its encryption bill.