Prime Minister Anthony Albanese on Thursday revealed former chief justice of the Queensland Supreme Court Catherine Holmes will lead a royal commission into the scheme, due to hand down its final report in April.

Mr Albanese said the inquiry would provide answers on how the "cruel" scheme materialised, how complaints were handled, and its impact on the nearly 400,000 victims, with reports many were led to suicide after receiving inaccurate debt notices.

"One of the commitments that I made was to put the humans back into human services, to make sure this can never happen again," he said.

The debt recovery scheme, an automated system used to determine whether Australians owed money to the Commonwealth, was ruled unlawful in 2019 and later blasted as a "shameful" by a Federal Court judge.

But Coalition leader Peter Dutton has described the royal commission as a "witch hunt", accusing Mr Albanese of attempting to "get square" with his predecessor Scott Morrison.

Partner at Gordon Legal James Naughton, who led a successful class action on behalf of Robodebt victims, said the "industrialisation" of debt collection had "outsourced responsibility to an algorithm".

The class action secured the repayment of more than $1.7 billion in erroneous debts, along with $112 million in compensation.

But hundreds of thousands of victims were reportedly still waiting for repayments as of July, and Mr Naughton said a financial claim alone could not uncover how the government "got into this extraordinary mess in the first place".

"[Victims] were painted out by [Alan] Tudge and others during the policy as being dole bludgers, people who are going to be hunted down," he said.

"But in reality, they were people who were on disability support pensions, who have no other source of income through no fault of their own."

Mr Naughton said victims came from "an incredibly diverse" spectrum, with many already suffering mental health crises exacerbated by the scheme. In some "outrageous" cases, they were on welfare and forced below the poverty line as they paid erroneous debts, he said.

"For a small number of people that letter saying you owe this money and you have to pay it back just came at exactly the wrong time in their lives ... as they were dealing with complex issues and personal problems," he said.

"The stories are harrowing. It did have a real life consequence and devastating effects on a small number of people."

Mr Albanese, who fulfilled an election commitment with Thursday's announcement, said Labor had both a mandate and responsibility to provide victims with answers.

"People lost their lives ... What we also know is that those people who are most vulnerable were the least likely to go to their local member, to have the confidence to do that," he said.

"That's why we need to get to the heart of why this occurred."

Simon Katterl, embroiled in a year-long battle with Centrelink, said the scheme was the "logical endpoint" of a dehumanising approach to people on welfare in Australia.

In 2018, Mr Katterl was told he owed $2000 but asked for the debt to be reviewed, a process which was repeatedly delayed despite regular requests for updates.

"I was getting charged interest, and getting more and more threatening letters from them, when they were the ones failing to click that mysterious button that reviews my matter," he said.

Mr Katterl said his mental health worsened as a result of the saga, leaving him unable to pursue the case at stages.

"[But] there are people who are not in the same position as me, to take notes, to take caller numbers," he said.

"They're not even administering this terrible policy properly. How did that happen, and what are they going to do to fix that?"

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Upon telling Centrelink he would file a freedom of information request over the delays, Mr Katterl was quickly informed his debt was only $60.

After a year of contacting Centrelink, the ombudsman, and his local MP, a complaint by Mr Katterl was ultimately upheld in a single-line email.

"The whole thing basically just died at that point. I didn't have too many more levels to take it to," he said.

Mr Albanese said he would not "pre-empt" whether the royal commission would compel former Coalition ministers - including former prime Scott Morrison, former government services minister Stuart Robert, and former attorney-general Christian Porter - which he said would be a matter for Justice Holmes.

Government Services Minister Bill Shorten, who has been raising questions over the scheme's legality since 2017, described Robodebt as a "massive failure in policy and law" which had caused "untold harm".

"The last government gave us Robodebt. The last government gave us Robo-victims. The last government gave us Robo-denial," he said.

"Today, Labor will give the victims some Robo-justice."

The use of third-party debt collectors will also be under the microscope during the inquiry.

"We've stopped a lot of the processes that the previous government had, but we're going to continue reforming debt collection systems," Mr Shorten said.

"I don't see why we should be using debt collectors to chase you know, citizens before we've even explained to people why they might owe a debt."

Mr Dutton claimed automated income averaging begun under Labor - that is correct, though the Coalition removed all human oversight - and warned the royal commission would be politicised.

"The prime minister sees political advantage in this ... [he] knows lots of tricks in the book, and you're seeing it now with the announcement of a royal commission into Robodebt; again, a witch-hunt," he told 2GB Radio on Thursday.

And with Mr Albanese announcing a future inquiry into Scott Morrison's secret ministries scandal, Mr Dutton accused the prime minister of fixating on his predecessor.

"Anthony Albanese has become obsessed ... [He] is obsessing about this sort of 'get square' with Scott Morrison, and families are struggling to pay their power bills," he said.

The Federal Court last year approved a $1.8 billion settlement between the Commonwealth and victims, with Judge Bernard Murphy blasting a "huge waste" of taxpayer money.

"The proceeding has exposed a shameful chapter in the administration of the Commonwealth social security system and a massive failure of public administration," he said.

Anglicare Australia executive director Kasy Chambers called for the inquiry to look at Australia's debt recovery system more broadly.

"The community sector, financial counsellors, and most importantly, the people affected by the system were ignored over and over again when they told their stories," she said.

"The wrongs and personal pain caused by Robodebt could have been avoided if the Government has listened to those who know.

"At this royal commission, decision makers will need to explain why they dismissed almost every piece of feedback and advice."

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