The alleged donation scheme engulfing the New South Wales Labor Party is unlikely to have been brought under the same scrutiny if similar allegations were to occur at the federal level, prominent barrister Geoffrey Watson has warned.

Key points: Former counsel assisting ICAC, barrister Geoffrey Watson, says there needs to be a national integrity commission

Former counsel assisting ICAC, barrister Geoffrey Watson, says there needs to be a national integrity commission NSW ICAC is holding hearings into an alleged donation scheme in the NSW Labor Party

NSW ICAC is holding hearings into an alleged donation scheme in the NSW Labor Party Mr Watson says if an alleged donation scheme happened at a federal level there is no agency to look into it

The NSW Independent Commission Against Corruption (ICAC) began public hearings last week into whether some Labor Party officials and political donors entered into an alleged scheme in breach of NSW donation laws.

The inquiry has focused on a Labor Friends of China dinner in March 2015, where $100,000 in donations were made by 12 separate donors.

The inquiry has heard evidence from a NSW Labor official who alleges the source of the $100,000 was actually Chinese billionaire Huang Xiangmo.

The individual donations were alleged to be by "straw donors" designed to conceal that the donor was Mr Huang, who is prohibited from making donations in NSW because of his property-development business.

The official told the inquiry Mr Huang personally delivered the funds to the NSW Labor headquarters in cash in an Aldi bag in April 2015.

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Mr Huang is not currently in Australia. His permanent residency was cancelled earlier this year.

Concerns have been raised about his relationship with the Chinese Government, in a political environment where there are growing concerns over foreign influence attempts.

"The whole of Australia should be watching this with eagle eyes because this is a really important point that's being debated here," Mr Watson, who has previously acted as counsel assisting ICAC, told 7.30.

"It's talking about the influence exerted over an Australian election by the Chinese Government, if it goes that high. That's what we've got to look at. Does it go that high?"

Mr Watson is also the director of the Centre for Public Integrity, a group of former judges and top Australian lawyers campaigning for a national integrity commission that would have the powers to examine corruption allegations at the federal level.

"It's a very sad moment in watching this to think if this same sort of conduct was occurring in a federal election, there is no properly equipped federal agency to look at the anti-corruption aspects," Mr Watson said.

"We need a federal, a national integrity commission, we need it now."

The inquiry is set to run for six weeks.