The Royal Commission into Institutional Responses to Child Sexual Abuse is holding a public hearing into former priest John Joseph Farrell who was jailed for a minimum term of 18 years in May after being found guilty of a string of sexual offences against children.
In her opening address, senior counsel assisting the commission Gail Furness said Farrell's offences first came to light when he was a priest in Moree in 1984.
When Farrell was confronted with the allegations, the commission heard he admitted to church officials "he had done something stupid".
Ms Furness told the commission Farrell was treated by psychologist Gary Boyle, declaring himself "a new man" after one session. Dr Boyle found that, "Farrell did not present as a man with true paedophilia", the commission heard.
Farrell was moved to Tamworth and then to Merrylands and Kenthurst in Sydney.
"Father Usher came to a different conclusion from that of Mr Boyle," Ms Furness said. "He offered the opinion that Farrell's ongoing need to spend time with children was a matter of grave concern."
The commission heard a second report by a psychiatrist found: "Farrell posed a potential risk to children and prepubescent children are in danger where he is."
The inquiry was told Farrell made admissions he had "sexually interfered" with boys at a meeting with Father Usher, Father Brian Lucas and Father Wayne Peters in 1992.
Farrell was given a five-year leave of absence from the priesthood in 1992 and laicised in 2005, the commission heard.
Child sexual abuse charges against Farrell were dismissed in 1987 and, in a separate case, in 1998.
The former priest was found guilty of 79 child abuse offences against 12 victims in May. Last week, the 63-year-old was charged with fresh offences with a trial set down for April next year.
The commission's hearing will examine how the Dioceses of Armidale and Parramatta responded to claims against Farrell as well as the role of the Catholic Church's Special Issues Resource Group, set up to deal with criminal allegations.
In his opening remarks, commission chairman Peter McClellan said almost two-thirds of people who have given testimony in private sessions were abused in faith-based organisations.
The commission was told abuse in Catholic institutions was reported by 40 per cent of people in private sessions, followed by the Anglican church (8 per cent) and the Salvation Army (4 per cent).
Catholic institutions have featured in one-third of the commission's public hearings.
The inquiry into Farrell will be the last to deal with Catholic organisations and is expected to hear evidence from a number of his victims on Tuesday.