The Morrison government insists it isn't considering getting its cyber spooks to spy on Australians at home but says it does need better capacity to fend off online attacks.
However, the opposition wants clarity around what exactly the government might be proposing.
Home Affairs Minister Peter Dutton said cybercrime was a growing problem and there needed to be a massive debate around how to counter it over the next decade.
"I think there needs to be a sensible discussion about whether or not we've got the ability to deal with threats we face," he told ABC's Insiders on Sunday.
He used the example of Australian agencies being able to help shut down a pedophile ring that was live-streaming child abuse from a server in the Philippines but not being able to do the same if the computer was located in Melbourne.
The minister also suggested Australia wouldn't be able to fend off a major attack on its big banks.
"At the moment we don't have the sophistication or the capacity to be able to mount a counter-attack or to be able to have the technical capacity to be able to deal with that."
The Sydney Morning Herald and The Age have reported national security officials are discussing broadening the targets for the Australian Signals Directorate to cover domestic computer network crime, and allowing the agency to sit within the networks of major Australian power, water, telecommunications and other critical infrastructure companies to help defend them against cyber attacks.
They also reported the push was coming from within Home Affairs and that ASD wants to keep its focus on foreign targets.
A similar proposal, shot down under Malcolm Turnbull's leadership, was the subject of reporting more than a year ago that led to police raids on a News Corp reporter's home at the start of June.
Labor Home Affairs spokeswoman Kristina Keneally said the government must spell out exactly what it wants to do.
"If Peter Dutton is reviving this proposal within government it's incumbent upon him to explain to the Australian people and to the parliament what he is exactly looking to do, what safeguards will be in place, what oversight and what Australians could be subject to in terms of domestic surveillance," she told reporters in Sydney.
Australian Associated Press