PREMIER Barry O'Farrell has agreed to set up a special commission of inquiry to probe allegations made by a senior police investigator into child sex abuse at the hands of Catholic clergy in the NSW Hunter region.

The commission announced today will be headed by senior counsel Margaret Cunneen to look into claims made by Detective Chief Inspector Peter Fox, alleging cover-ups by police and the Catholic Church in the Hunter.

Mr Fox had publicly challenged Mr O'Farrell to launch a royal commission, writing an open letter to the premier and criticising the state government's continued failure to launch a judicial inquiry on national television.

Mr O'Farrell said while he had "full confidence"' in police commissioner Andrew Scipione and the police force, the matters raised were serious.

"They go to the question about whether there has been interface, either within the police force, or by the Catholic Church, in relation to specific allegations of pedophile activity in the Hunter,'' he told reporters in Sydney today.

Det Chief Insp Fox, who has investigated clergy abuse around Newcastle for decades, wrote an open letter to the premier and then criticised the state government's continued failure to launch a judicial inquiry on national television.

"We're lucky. We haven't had to go through what some of those other families have gone through," he told ABC's Latelinelast night, noting that Mr O'Farrell is the father of two boys.

"He has a lot of thanks to give that his boys were never ever abused. ... If he has any compassion and humanity for some of these victims, he's got to turn around (his position)."

The comments came after the senior officer published an open letter stating that there are so many NSW sex abuse cases that he's actually lost count.

"I can testify from my own experience that the church covers up, silences victims, hinders police investigations, alerts offenders, destroys evidence and moves priests to protect the good name of the church," he wrote in his letter.

"Mr O'Farrell, please don't block your ears. Many priests don't want a royal commission, nor does the hierarchy of the church, but God knows we need one."

Det Chief Insp Fox said he has "irrefutable" evidence of a cover-up involving a number of diocese bishops.

"It potentially goes even higher than that," he told Lateline.

In 2010, a woman he said is a credible whistleblower and church insider came forward and gave him an "explosive" statement that is now with the Director of Public Prosecutions.

"There is an archbishop, a bishop and a priest that are implicated in a potential cover-up," he said.

But he said he was directed to give all of his material to a taskforce upon learning of the information.

A superior officer then stood him down from investigating child sex abuse cases further, he said.

He said he doesn't know why he was stood down, but noted that many in the NSW police force would consider him to be outspoken.

He's also not sure if he will face disciplinary action for publicly calling on the premier to act.

"But I don't care," he said.

"What I do care about is that there are so many victims out there. ... There's something very wrong when you have so many pedophile priests operating in a such a small area for such an extended period of time with immunity."

Police later released a statement that stressed how Det Chief Insp Fox's views are not those of the force.

"NSW Police Force are not in a position to comment on the call for a judicial enquiry," the statement said.

But the statement clarified that Det Chief Insp Fox had only been removed from the case because the taskforce was being run in another regional command area.

Police also believe the allegations he raised of cover-ups by the church have been investigated thoroughly, the statement said.

"As a whole the church have cooperated with police," the statement said.

Those views, however, are in contrast to those held by Victoria Police.

Last month, police in that state accused the Catholic Church of intimidation, secrecy, destroying evidence, and failing to report accusations against the clergy.

Deputy Commissioner Graham Ashton told a parliamentary inquiry that the church had also hindered justice by failing to report a single case of child sex abuse in more than 50 years.

"The process is designed to put the reputation of the church first and victims second," he said.

Read the full transcript of Peter Fox's interview here