Monsignor Thomas Doyle, former head of the Catholic Education Office, testified on Thursday that Archbishop Frank Little did nothing about complaints concerning Doveton Parish priest Peter Searson, despite receiving written warnings about his increasingly erratic behaviour.

"It was difficult, required I think, action by the archbishop, and the archbishop didn't act," Monsignor Doyle said. "In my opinion he [Searson] should have been removed from the parish."

Monsignor Doyle said the issues at Doveton were "one of the worst of its kind" dealt with by his office, but, despite concerns being raised about the risk Searson posed to children, the archbishop and vicar-general chose to leave him at Doveton.

During a grilling about what additional evidence he needed to substantiate a complaint against Searson after witnesses came forward Monsignor Doyle said he was "not quite sure".

Asked why he did not do more or seek help from other bishops when made aware of Searson's behaviour, Monsignor Doyle said: "Well, If I couldn't convince the archbishop I don't think the regional bishop could have either."

Monsignor Doyle, who was appointed director of the Catholic Education Office by Archbishop Little, was responsible for the performance of Catholic schools and their priests in the Melbourne archdiocese from 1979 to 2002.

He said he expected that letters to Archbishop Little detailing serious concerns about Searson's conduct would have been referred to his office but had no recollection of seeing the correspondence.

It follows testimony on Wednesday by former principal of Holy Family primary, Graeme Sleeman, who said he referred "hundreds" of complaints about Searson to the Catholic Education Office in the mid-1980s.

Mr Sleeman, whose career was destroyed for taking a stance against Searson, said parents and teachers complained daily about the priest's bizarre behaviour.

The former head of the Doveton school said nothing came of his complaints about the priest, who he described as a "raving lunatic".

Mr Sleeman said he alerted other senior church figures about his concerns but was repeatedly told there was insufficient evidence to investigate the priest. "No one wanted to take any notice," he said.

The royal commission had earlier heard that Searson was known for carrying around a handgun, had shown children a dead body, and abused children in the confessional.

Abuse survivor Julie Stewart gave evidence that she was indecently assaulted by Searson in the confessional on multiple occasions as a nine-year-old child.

Searson was the parish priest at Sunbury before being transferred to Doveton.

In a May 1982 letter to Archbishop Little, a Sunbury parishioner described an "intolerable situation" at the church and called for Searson's removal from parish duties. The parishioner said they had instructed their child never to be alone with the priest.

A letter sent that same month by Father O'Donnell, assistant priest at Sunbury at the time, said there was "continual conflict" with Searson and that he did not have the "slightest doubt that Peter is psychologically unsuitable to be the pastor of this parish or any other".

He said Searson humiliated women, reduced people to tears and had been caught shoplifting "again".

After Searson was moved to Doveton, Archbishop Little was sent another letter advising him that Searson had pointed a gun at people.

On Thursday, Monsignor Doyle testified that he recalled learning about allegations that Searson had tape-recorded children in confession and made them kneel between his legs, but could not say for certain whether he escalated the complaints.

"I think they're so serious that I would have immediately gone to the archbishop about them," he said.

Data produced to the royal commission shows four people claimed child sexual abuse at the hands of Searson and that the church paid out $291,000 to three victims. Searson died in 2009 before facing any child sex charges.

The royal commission is examining the Catholic Church's handling of sex abuse allegations in Melbourne in the 1980s and '90s with a focus on eight priests associated with the Holy Family Parish and primary school in Melbourne's south-east.