Privacy Commissioner John Edwards says the Ministry of Social Development's (MSD) policy that requires social service providers to disclose client information goes too far.
Under the policy, providers will have to give the client information to the ministry when they apply for funding.
Speaking to The AM Show on Thursday, Mr Edwards said it would put people off seeking necessary help.
"The experience you or I might have of an organisation like MSD - which is that everyone's there trying to do their best for people, trying to help people in their tough times - that's not the experience of a lot of people," he told host Duncan Garner.
"Just seeing that on the form - if you access these crisis services, that'll go to MSD - that's gonna put some people off and maybe even stop them getting the help they need."
In addition to that, it'll worsen MSD's data, with people dropping off the grid and becoming "invisible" to Government and policy-makers.
Mr Edwards said MSD had not clearly explained why it wanted the client data.
"I don't think they need it from everyone for every service they access… They need to say what it is going to be used for and what it isn't going to be used for."
Labour and the Greens have opposed the policy from the start, and they're backing Mr Edwards.
"The report confirms Labour's belief that those who are most in need of social services, such as Women's Refuge, Rape Crisis and Mental Health Services, may be deterred from seeking support," said Labour's Carmel Sepuloni.
The Greens' Jan Logie says the Government must drop the policy.
Mr Edwards has suggested anonymising the data would be a good step. He also praised MSD's moves to exclude collecting information from people seeking sexual violence services.
"There was quite a backlash from NGOs, and I think the minister has heard that."
NZN / Newshub.