Victims groups say they are horrified by the revelation that one of Australia's most senior priests deliberately ignored allegations of sexual abuse.

The startling admission came from the former head of the Maitland-Newcastle diocese in New South Wales, retired Bishop Michael Malone.

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He has given evidence at the NSW Special Commission of Inquiry into the alleged cover-up of child sexual abuse in the diocese by priests as well as by members of the police force.

The inquiry is looking at whether the church covered up the crimes of two paedophiles, Catholic priests Dennis McAlinden and James Fletcher, who served in the Newcastle-Maitland diocese.

It was commissioned after whistleblower Detective Chief Inspector Peter Fox claimed that the church and police tried to hinder the investigation into child abuse committed by the pair.

Counsel Assisting the inquiry, Julia Lonergan SC, says the terms of reference requires the commission to examine if, and the extent to which, officials of the Catholic church facilitated or cooperated with police investigations.

"[That includes] whether any investigation has been hindered or obstructed by, amongst other things, the failure to report alleged criminal offences, the discouraging of witnesses to come forward, the alerting of alleged offenders to possible police actions, or the destruction of evidence," she said.

Bishop Michael Malone was in charge of the diocese for 16 years.

He said he was out of his depth in matters of child protection and that he turned a blind eye to decades of complaints against Father McAlinden because "the whole area of sexual abuse is so distasteful that I would have found it unpalatable."

Former Maitland Newcastle Catholic bishop Michael Malone. ( ABC News: Dan Cox )

Victims' supporter Nicky Davis said while Bishop Malone sounded genuinely sorry in his testimony, she felt he had not considered the victims.

"The most telling comment of all was the fact that he said that he didn't look in the files because to do so was distasteful," she said.

"I felt like shouting at him: 'You try being on the receiving end of it'.

"Earlier on in his testimony he really wouldn't admit to anything.

"Every single answer he gave was so evasive that he couldn't be held to anything from the answers that he gave."

Bishop Malone also revealed that under Canon law, bishops keep a secret archive on priests, and each year historical documents relating to criminal cases concerning moral matters are supposed to be destroyed.

Bishop Malone did not destroy documents, but said: "Perhaps I should have".

"I might not have been in this room if I had destroyed them," he said.

Bishop Malone made a public apology to victims in 2008.

The commission will hear evidence from another senior member of the church, Father Brian Lucas, next week.