Australian Security Intelligence Organisation Director-General Duncan Lewis sounded the warning while arguing the case for proposed new police and intelligence agency powers to access encrypted messages.

Mr Lewis slammed "misreporting" as to why there had been such fear in the community about the proposed laws.

"I can confidently say that there are suspected terrorists in Australia using encrypted communications and due to that encryption it's impossible to intercept and read their communications," Mr Lewis told a hearing in Canberra on Friday.

Australian Federal Police commissioner Andrew Colvin says encryption issues are hampering the investigation of criminal cases.

"Sometimes a simple passcode on a phone is all it takes to thwart police from accessing evidence that might save lives," Mr Colvin said.

Despite the focus on encryption, shadow attorney-general Mark Dreyfus wanted to know why the word is only used once in the 172-page legislation amendment bill.

ASIO and AFP say avoiding the word in the bill deliberate.

The laws create a new regime for law enforcement and security agencies to first ask - and then demand - that technology companies assist them in decrypting information.

It would create a new covert computer access warrant regime and toughen search and seizure powers.

Australia's peak body for lawyers has concerns the new police and intelligence agency powers could breach privacy and legal rights.

Law Council president-elect Arthur Moses said while there is value in the laws, he has "serious reservations" about the bill.

"The bill as presently drafted would authorise the exercise of intrusive covert powers with the potential to significantly limit an individual's right to privacy," Mr Moses told the hearing.

"If a person is required to attend a place to provide information or assistance this may arguably amount to detention of that person, particularly as they may be arrested on suspicion of an offence if they attempt to leave.

"There should also be prescribed maximum periods for giving assistance, requiring an explanation of legal rights and responsibilities, and the availability of interpreters where required."

Telecommunications giants Telstra, Optus and Cisco were also given a chance to provide evidence.

Optus supports the "intent of the legislation", while Telstra says it wants to assist the government in adapting laws to modern technology.

But Cisco said there are concerns about the safety and privacy of its customers.

"We are troubled by what appears to be an authority in the bill to prohibit public disclosure about the development of new surveillance capabilities," Cisco Australia corporate affairs directors Tim Fawcett said.

"Cisco believes any form of surveillance technique implemented in its products needs to be publicly disclosed."

Australian Associated Press