A senior construction executive has admitted his company paid bogus invoices issued by Bill Shorten's old union after a workplace deal that "sold out" the 36-hour week for building workers.

Former Thiess John Holland human resources general manager Julian Rzesniowiecki told the royal commission into trade union corruption that the Australian Workers Union had politically "sold out" the 36-hour week as part of the proposed agreement.

He told the hearing on Tuesday that Mr Shorten was part of early discussions about the deal and $100,000 so-called side payments when he was Victorian state secretary and national secretary of the AWU.

Mr Shorten launched a strong defence of his time as Victorian and national secretary of the AWU after a second day of damaging testimony put him under the microscope on Tuesday, declaring he did not strike an agreement that saw the company pay $100,000 a year for the three-year term of the EastLink road project in Victoria to fund a full-time organiser for the AWU.

But the Opposition Leader could not say whether he had had discussions about funding an organiser for the project because "I don't recall every discussion".

Labor MPs played down the impact of the commission hearings on the Opposition Leader's political standing, arguing the hearings were seen as a political witch hunt, but admitting the ongoing saga could further damage Mr Shorten's credibility, that Mr Shorten' was under mounting pressure since the switch from Tony Abbott to Malcolm Turnbull and that pessimism had descended on the caucus because of the leadership change.

Despite Mr Shorten's denials on Tuesday, a signed witness statement by Mr Rzesniowiecki said he had a diary note of December 14, 2004, which refers to discussions about the appointment of four union organisers, and that this was suggested by Mr Shorten.

Embattled Victorian Labor MP Cesar Melhem, Mr Shorten's successor at the AWU, was said to have completed the deal when he was an AWU official.

The evidence came a day after former Thiess manager Stephen Sasse, said his early discussions about the payment of $300,000 to the union were part of a deal over the $2.5 billion EastLink Melbourne road project discussed with Mr Shorten in late 2004.

Mr Rzesniowiecki gave evidence, in a private hearing before the commission on June 30, that an agreement was reached between Mr Shorten, Mr Sasse and "probably" Mr Melhem, before December 2004.

Mr Rzesniowiecki said the agreement was not common knowledge and not something the company was comfortable being made public.

Asked by counsel assisting the commission, Jeremy Stoljar, what arrangement was made, Mr Rzesniowiecki said invoices were made out for advertising, sponsorship of events and other things as he did not want the invoices described as providing for a union organiser.

"The main purpose was to disguise the fact that we were funding an organiser," Mr Rzesniowiecki said.

He told the commission that "I think it suited both of our purposes [the company and the union] for it to be kept quiet".

Mr Rzesniowiecki said the company had not commissioned any work on research into back strain for which a $33,000 invoice was paid, a $9000 payment for 20 tickets to a population forum was actually an instalment on the $100,000 and a $33,000 payment for advertising in the Australian Workers Magazine was "inflated" from the normal cost of $5000 per edition.

Mr Shorten said he had not heard Mr Rzesniowiecki's testimony on Tuesday but that Mr Sasse's evidence had "made it really clear, black-and-white clear ... that there was no arrangement of the nature that you're just putting to me now", referring to the deal between the construction company and the union.

"As I've said since I appeared at the royal commission, I did not strike any agreement of the nature which you are raising, full stop," he said.

"Was there an agreement? No, there wasn't."

One ALP source said that "everyone is watching it [the commission] to see what happens, it's the only game in town."

Another MP said he was "not getting too excited" about the commission hearings and that caucus was taking a wait-and-see approach.

The switch to Mr Turnbull, however, meant it would be "very, very hard" for the ALP to win the next election and that pessimism had descended on Labor MPs.

A third MP said the caucus was now confronting the reality that winning the next election meant winning 21 lower house seats and defeating a first-time government, a "brutal reality".

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