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UPDATE: Prime Minister Julia Gillard has agreed to a royal commission into institutional responses to allegations of child abuse in Australia.

The royal commission will be recommended by Ms Gillard to the governor-general and the terms of reference would be worked on in coming weeks.

“I want to get this right,” the Prime Minister said.

“So over the next few weeks we will be consulting with the organisations that represent the survivors of child abuse, with religious organisations, with state and territory government to ensure the terms of reference are right.”

Mr Gillard said she had already spoken to the premiers of NSW and Victoria, states which are already pursuing their own inquiries.

“Both of them are prepared to take a cooperative approach,” she said.

Mr Gillard said any instance of child abuse was a vile and evil thing, she told reporters in Canberra on Monday.

“Australians know, from the revelations that they’ve read in recent weeks that too many children have suffered child abuse but have also seen other adults let them down.

“They’ve not only had their trust betrayed by the abuser but other adults who could have acted to assist them have failed to do so.”

"Australians want to see action taken," she said.

"They don’t want to see institutions fail again to deal with allegations of abuse. I hope that this royal commission can guide us to that place."

The terms of reference will include children that were in the care of religious organisations, state care and schools - private and state.

"We need to learn lessons about how institutions can best respond when there are allegations of sex abuse," she said.

Ms Gillard said federal cabinet was supportive of a royal commission.

Attorney-General Nicola Roxon would work on the terms of reference, with the acting minister for families Brendan O’Connor.

“Child abuse is always wrong, always heart breaking, always distressing,” she said.

“We all want to do all we can to ensure that we do not see in the future institutions fail to respond if there are allegations of child abuse in their midst.”

The prime minister acknowledged it was an “incredibly complex and sensitive area”.

“Some people may want there to be the maximum public airing of what happened to them - that might be biggest healing that they could have.

“For others, I imagine that standing somewhere public and telling their story would be their version of hell.

“This will have to be dealt with sensitively and be a job for the commission to work through.”

She said a royal commission offered “the broadest sweep of potentials for the working of the commission”.

“That’s why I’ve chosen it.”

She said they needed to ensure the royal commission process did not end up holding up prosecutions that may be underway.

Ms Gillard gave no timeframe for the inquiry but said it would take some time.

She also said she had spoken to the Catholic Church’s senior cleric in Australia, Sydney Archbishop, Cardinal George Pell.

“This is a royal commission that would be looking across religious organisations, as well as state-based care and into the not-for-profit sector,” she said.

“So this is not a royal commission targeted at any one church.”

But Ms Gillard said her discussion with Cardinal Pell “indicated that he’s taking a very co-operative attitude”.

Earlier today, the coalition said it would support a wide-ranging royal commission into the sexual abuse of children.

Opposition Leader Tony Abbott says such an investigation should not be limited to one institution.

Federal Labor backbenchers, independent MPs and the Greens have been calling for Prime Minister Julia Gillard to establish a royal commission into child sex abuse inside the Catholic Church.

The demand for a national response comes after NSW Premier Barry O'Farrell last week announced a special commission to investigate allegations of abuse by clergy in the Hunter region and a possible cover-up.

Mr Abbott says the coalition “would be prepared to support” a wide-ranging royal commission investigation into the sexual abuse of children.

“Its clear that for a long period there was insufficient awareness and insufficient vigilance when it came to predatory behaviour by people in positions of authority over children,” he said in a statement today.

“A lot of terrible things have been done, and a lot of people have suffered deeply.

“For these reasons, if the government were to propose a royal commission to investigate the sexual abuse of children, it is something the coalition would be prepared to support.”

Mr Abbott said any probe must be wide-ranging, must consider any evidence of the abuse of children in Australia “and should not be limited to the examination of any one institution”.

The community must have zero tolerance for the sexual abuse of children, victims must be allowed to heal and perpetrators must be brought to justice, he said.