Among recommendations of the Independent National Security Legislation Monitor is scrapping the reliance on using a security classification, such as 'top secret', as a basis for an offence.
The current regime was heavy-handed and in some instances it conflicted with the rule of law, Jake Blight said in his review of secrecy laws handed down on Thursday.
An offence should apply to information deemed to harm the operations, capabilities, technologies, methods or sources an agency uses to obtain information rather than a blanket penalty, his review found.
"Disclosure of information about the core intelligence operations, capabilities, technologies, methods and sources of Australia's six main intelligence agencies will almost always be harmful to the national interest," the report said.
"But it does not follow that all information to do with those agencies will always be harmful.
"This is particularly so for agencies whose functions have expanded beyond traditional intelligence functions and now include assisting other bodies - such as the Department of Home Affairs - with their functions."
This includes broad cybersecurity information, commercial mapping and routine administration, the report goes on to say.
There were also problems with the proportionality and uncertainty surrounding some offences, Mr Blight found.
Broad terms such as information relating to "the functioning of government" should be avoided, the watchdog recommended.
"Excessively wide or uncertain secrecy laws can undermine trust in government and unreasonably impact the important role of a free press and civil society groups," he said.
Human Rights Law Centre senior lawyer Kieran Pender said unnecessary and disproportionate levels of secrecy were bad for democracy.
"There is no public interest in punishing and criminalising whistleblowers who play a crucial role in exposing government wrongdoing," he said.
He called on the government to implement the recommendations - branding them "a step in the right direction" - and set up a dedicated whistleblower protection authority.
The report came out as Greens senator David Shoebridge also pushed to have the government commit to setting up a whistleblower protection authority and affirm its support to protect whistleblowers.
He seized on the arrival of Julian Assange back in Australia after pleading guilty to espionage charges in the US as the reason why whistleblowers needed to be protected.
"We must stand with them, and we must ensure that the legal structures we put in place are there to protect them, to tell truth to power and ... not go to jail for the privilege," he told the Senate as he moved a motion.
Assistant Minister Jenny McAllister said the government was committed to reforming whistleblower protections in a staged process and consultation about the next steps was ongoing.
