The head of the royal commission into trade unions, Dyson Heydon, has conceded he "overlooked" the connection between the Liberal Party and a speech he had agreed to give.

The Opposition believes Justice Heydon agreeing to give the Sir Garfield Barwick oration is the smoking gun it needs to prove the commission is politically motivated, because the event is also a Liberal Party fundraiser.

After the Australian Council of Trade Unions (ACTU) interrupted the Royal Commission into Trade Union Governance and Corruption's proceedings to discuss the matter on Monday, Justice Heydon said that to the best of his knowledge, he first informally discussed giving the speech "several years ago".

He then said that on April 10, 2014, a further approach was made to him after he had given another speech.

At that time, Justice Heydon said he would give the oration in August 2015, if the commission had finished its work.

Justice Heydon noted the commission was at that stage due to have reported to the Governor-General by December 31, 2014.

By approximately March 2015, he said he was again contacted by the coordinator of the speech.

Justice Heydon said at that time: "I overlooked the connection between the person or persons organising the event and the Liberal Party which had been stated in the email of 10 April, 2014."

The former High Court judge said he also overlooked the fact his agreement to speak at that time had been "conditional on the work of the commission being completed before that time".

Despite the flyer advertising the event saying all proceeds would go towards the Liberal Party's New South Wales state election campaigning, Justice Heydon told the commission he did not understand it "was in any sense a fundraiser".

ACTU to decide on pursuing disqualification on Thursday

Justice Heydon has given the ACTU until Thursday afternoon to decide whether they will apply to have him disqualified for bias.

Earlier on Monday, Robert Newlinds SC, who has been representing the ACTU, said he would need at least 24 hours to assess the documents and make a decision on whether or not he would apply to have Justice Heydon disqualified.

But the request caused a heated exchange with Justice Heydon, who initially said he would give him half an hour.

"I can't accept that, Mr Newlinds. I think an application of this type is rather important," Justice Heydon said.

Sorry, this video has expired Dyson Heydon 'a man of honour', Abbott says

"I think it's important as well, which is why I want to consider the position," Mr Newlinds replied.

"And if it's being suggested that if I don't make it now I will have forever waived it, my submission would be that would be wrong as a matter of law.

"The proposition ... seems to be that I'm grandstanding, intentionally creating a farce."

The commissioner maintained his stance, and adjourned the hearing for two hours.

When the hearing resumed, Justice Heydon made the announcement about the Thursday deadline.

Labor spokesman Tony Burke told question time the Government must now scrap the royal commission.

Prime Minister Tony Abbott again defended Justice Heydon and insisted the event was not a fundraiser, despite last week saying it was.

Records kept by the New South Wales state archives confirm Mr Abbott and Justice Heydon first crossed paths at least three decades ago.

The documents show Justice Heydon was on the selection committee that awarded Mr Abbott his 1981 Rhodes Scholarship.

Opposition Leader Bill Shorten called on Mr Abbott to take action against Justice Heydon.

"Dyson Heydon was Tony Abbott's captain's pick to run the royal commission," he said.

"Tony Abbott, I think, has another Bronwyn Bishop situation emerging, which I think he needs to act upon.

"This whole problem is because of Tony Abbott and he now needs to act."