The government is being accused of "incompetence at the highest level" after the latest revelations around illegal spying and the Kim Dotcom case.
It was confirmed on Tuesday that the police told the Government Security Communications Bureau (GCSB) the internet tycoon was a foreign national - although he threw a $500,000 fireworks party in 2010 to celebrate gaining New Zealand residence.
And Prime Minister John Key told parliament his deputy Bill English last month signed a suppression order to keep the GCSB's snooping secret, and didn't tell him until Monday night.
That proved Mr English knew about the spying, which Mr Key wasn't aware of until last week.
"There is incredible incompetence at the highest level of government," Labour leader David Shearer told reporters.
"It beggars belief, I cannot believe Bill English didn't tell John Key by telephone or at a cabinet meeting."
NZ First leader Winston Peters says the working relationship between the two is "woefully dysfunctional... this is evidence of a complete breakdown in communications".
Court documents show the GCSB started spying on Dotcom and his associates in December last year and continued until they were arrested in January this year for alleged internet piracy.
The agency had asked the police if they were foreign nationals, and was told they were.
Dotcom and one of his associates, Bram van der Kolk, are both residents.
Only the Security Intelligence Service is allowed to spy on New Zealand citizens or residents, and it needs a ministerial warrant to do that.
In parliament, opposition MPs held up photos of Dotcom's fireworks display.
"It was in every newspaper in the country," Greens co-leader Russel Norman said.
Mr Shearer said the GCSB was one of the government's top "intelligence" agencies and it was unbelievable it hadn't made sure of Dotcom's status.
Mr Key fended off a torrent of questions in parliament, repeatedly telling opposition MPs "not to jump to conclusions" and to wait for the inquiry report which he expects by the end of the week.
He has asked the Inspector-General of Security and Intelligence, Justice Paul Neazor, to find out what went wrong.
