The decision to set up a National Integrity Commission - which the Greens and Nick Xenophon Team have long advocated - would cost an estimated $58 million over four years, according to the independent Parliamentary Budget Office, and have the sweeping powers of a royal commission.

That means, in practice, the body would have search and surveillance powers, the ability to compel witnesses and subpoena documents - and would be independent, well-resourced, and examine "serious and systemic corruption in the public sector", according to Mr Shorten.

"I want the National Integrity Commission to be a clear, concrete and impartial mechanism, to help restore trust, accountability and transparency in the Commonwealth sector," he said.

"So what we're proposing is it would cover the judiciary, it would cover the Commonwealth public service, businesses and people who transact with the Commonwealth and the Governor-General."

One commissioner and two deputies would be appointed by the parliament to a fixed five-year term to lead the body. It would report to parliament annually and, crucially, be empowered to make findings of fact - not law - and then refer matters to the Commonwealth Department of Public Prosecutions.

Mr Shorten said politicians of all sides need to restore confidence in the political system because "the most corrosive sentiment in democracies around the world is the idea that politicians are only in it for themselves. And that’s simply not true."

"If the Liberals and Nationals want to work with us to get it done sooner - be my guest."

Labor's model adopts key design elements from a blueprint the National Integrity Committee, a body of former judges and corruption fighters working with the Australia Institute think tank.

Former Court of Appeal judge and committee member Stephen Charles called on the Coalition to match the policy.

“It is now to time for the federal government to meet this commitment by establishing a federal ICAC with teeth, to show they are serious about integrity and accountability in government,” Mr Charles said.

Institute executive director Ben Oquist said: “Public trust in politicians is at an all-time low, and still falling. A federal ICAC, with teeth, is the first step in rebuilding public trust.”

Greens leader Richard di Natale said Labor's announcement was "a good step, but is only part of the fix for our democracy. We must also get rid of the state-sanctioned bribery that is the current political donations system".

Mr Shorten also flagged a future Labor government could change Australia's workplace laws - an issue the peak union body, the Australian Council of Trade Unions, is preparing to campaign on in 2018 and possible changes to private health insurance.

Mr Shorten has repeatedly flirted with the idea of a federal anti-corruption body by supporting an inquiry into the creation of such a body and promising a government he led would examine the idea.

Prime Minister Malcolm Turnbull last year told Fairfax Media he was prepared to consider creating a federal anti-corruption watchdog, and repeated that view on Tuesday.

“I've said that we haven't ruled it out,” Mr Turnbull said. “We do have extensive anti-corruption measures already, the federal government.”

The Prime Minister referred to the Australian Commission for Law Enforcement Integrity and the Australian Federal Police as agencies with “extensive” federal anti-corruption powers.

He also questioned Mr Shorten’s “tattered” reputation on corruption.

“[Bill Shorten] fought tooth and nail to oppose the Heyden royal commission into trade union corruption,” Mr Turnbull said.

“He did everything he could to prevent the Parliament passing legislation to establish the Registered Organisations Commission, whose duty is to ensure that unions are run transparently and honestly and for the benefit of their members and not engage in corrupt practices.

“Bill Shorten's credibility on the question of corruption is pretty tattered.”

Labor's announcement came just hours after the NSW Independent Commission Against Corruption officially threw its support behind the push for a federal equivalent.

ICAC's executive director of corruption prevention, Lewis Rangott, said there was a clear case for a national integrity commission.

"There is a case for it, yes," he told a parliamentary committee into the influence of political donations on Tuesday.

"We're very proud of our work. We think we're an important part of the NSW integrity branch of government.

"We don't necessarily insist that the exact model that we've got in NSW is the perfect model for other jurisdictions. But the general thrust of paying attention to the need to minimise corruption is obviously very important."

On Sunday, Deputy Prime Minister Barnaby Joyce rejected the need for a corruption fighting body, saying the Senate already performed that function.

“I don’t think there is a real sense in Australia of a concern with the political system,” Mr Joyce said.

“We don’t lack any capacity in our federal system to pursue issues that are a concern within the political frame. We’ve got a Senate in federal politics which all the time calls inquiries, it can basically subpoena people, it has the capacity if there is a query to follow that through."

with Lucas Baird