Five New Zealanders already fighting with the Islamic State in Syria, Prime Minister John Key says.
In a major speech in Wellington, Mr Key also revealed up to 40 people are on a Government watchlist because of their involvement with or support for Islamic State. Five New Zealand citizens or residents are fighting for IS in Syria, and nine New Zealanders have had their passports cancelled for wanting to do so.
Mr Key told the Institute of International Affairs this morning that New Zealand soldiers would not be sent into combat roles.
Ten military planners - three whom left for Iraq yesterday - would gather information from allied bases in the region and report back to ministers on whether New Zealand should have a role training Iraqi troops to fight the jihadists.
If they decided on that option, Special Air Service troops could be sent to Iraq to protect them, Mr Key said.
"Should New Zealand personnel be deployed in Iraq they would be behind the wire and limited to training local forces to counter ISIL and legitimately protect innocent people.
"It's what we're good at and we have a proven track record of doing such work in Iraq."
Mr Key said New Zealand was talking to the Australian government about what it was doing to help train Iraqi security forces and how New Zealand might help.
Any role New Zealand played would depend on an invitation from the Iraqi Government but whatever contribution was made would be in the best interest of New Zealand, he said.
"I have no doubt some will argue when we do so we increase the risks to our people domestically, regionally and internationally."
"My view is that there is already risk in all of those areas and the risk associated with ISIL becoming stronger and more widespread far outweighs that."
The Government would also put another $1 million towards the already $13.5 million provided in humanitarian aid for refugees from Syria and Iraq.
Mr Key said 30-40 people were on a Government watchlist because of their involvement with or support for IS.
"These are people in, or from, New Zealand who are in various ways participating in extremist behaviour."
They were a mix of immigrants and New Zealanders, and five were fighting for IS in Syria while others were IS supporters who had had their passports cancelled to prevent them leaving New Zealand.
Mr Key said others were involved in funding terrorism, radicalising others or were becoming radicalised themselves.
A further 30-40 people who were not on the watchlist required further investigation.
"We're extremely concerned about New Zealanders being attracted to this brutal regime - as in other Western countries, ISIL has been successful in recruiting New Zealander to its cause," Mr Key said.
He later said some of those on the list presented "same type of risk that you saw take place in Australia and Canada".
"All I can say to New Zealanders is that we monitor that situation incredibly carefully, we're doing everything we can to ensure their safety and security and at the point we felt we could act we would act."
The Government would change the law to allow the Minister of Internal Affairs to cancel passports for between one and three years and temporarily suspend them for 10 days in urgent cases, as a result of the growing international threat, Mr Key said.
It would also allow the Security Intelligence Service (SIS) to carry out video surveillance on private properties in cases of security concern.
The SIS would also be allowed, in emergencies, to begin surveillance up to 48 hours before the issue of a warrant, with the approval of its Director.
"These responsible and narrow changes will strengthen our national security settings and provide greater protections to New Zealanders. They'll be subject to a sunset clause and I trust political parties will recognise the need for these changes," Mr Key said.
As well, the Government would put another almost $7 million into the SIS to increase the number of staff available to work on investigations.