Today's Star-Times carries a prominent apology from the editor over their SIS story last year. The inspector of intelligence services has "declared" their allegations to be unfounded.
I don't think any apology is called for. Maybe they were a bit over assertive about the veracity of the story, but the job of a newspaper is to bring information to readers. If they have information which is interesting and not demonstrably untrue (at the time), then they should print it and let the readers make their minds up. With personal stories (especially about people who neither seek public office or court publicity) they need to be more careful - but this wasn't such a story.
On the facts presented, the story was probably rubbish. However, if the SIS *did* decide to spy on non-violent political groups, they would undoubtedly do so in a fashion that made it as hard as possible to get found out. It's likely that the only way we'd found out would be if one peripheral figure were to blag to the media - exactly as was alleged to have happened in the case in question.
Newspapers aren't like judges or politicians - they shouldn't be accountable in the same way for what get's printed - that way lies a dull and compliant media.