The fight against terrorism is eroding personal freedoms and boosting the chance that people will be unfairly singled out, Canada's privacy commissioner warned on Thursday.

As security agencies and the police collect more information about people, there's a greater chance that travellers and others will be unfairly treated, commissioner Jennifer Stoddart says in her annual report tabled in Parliament on Thursday.

The report cites, for example, recent U.S. pressure to require the Canadian government to share information about all people travelling to Canada.

"There is an increasing possibility that people will be subjected to unnecessary scrutiny, that people will be wrongly singled out, and that people will be treated unfairly," the report says.

It warns that mistakes have been made and will continue to be made.

"Because of a lack of transparency, we may never know why these individuals were wrongly targeted or where the system broke down."

The report also raises flags over the increasing tendency of national security agencies to hire private-sector companies to collect personal information about individuals.

It called the trend "troubling," citing British Columbia's recent proposal to let a Canadian subsidiary of an American company take over administration of the province's Medical Services Plan and PharmaCare programs.

Critics worry that this could potentially allow U.S. agencies such as the Federal Bureau of Investigation to obtain personal information about Canadians from U.S. companies under the USA Patriot Act.

The province's privacy commissioner has launched public consultations into the issue.

The office urged that a middle ground be found to balance increased security and privacy.

The report suggests one way might be to make more effective use of information already gathered, rather than collect new data. It notes, for example, that although more than 25,000 Canadian passports are lost or stolen every year, border officials don't have lists of the lost and stolen documents.