That's the case in certain countries. Since data travels, as it were, between the private and public sectors, that would be a good idea.
However, I would add that we waited 40 years for amendments to the Privacy Act for the public sector and 20 years for amendments to the act concerning the private sector. The risk involved in combining it all in a single act in Canada today is that it might delay passage of the act respecting the private sector, which is currently before Parliament.
In principle, the public and private sectors should be regulated in a similar manner. The contexts are somewhat different, but the statutes should be based on similar, if not identical, principles.