Australian Cardinal George Pell has said the Catholic Church made "enormous mistakes" in its handling of child sex abuse by the clergy.

Cardinal Pell, who is number three in the Catholic Church hierarchy, was giving evidence before Australia's Royal Commission into Institutional Response to Child Sexual Abuse.

"The Church has made enormous mistakes and is working to remedy those, but the Church in many places, certainly in Australia, has mucked things up, has let people down," said Pell, the highest-ranking Vatican official to testify in the Australian inquiry.

"I'm not here to defend the indefensible," said the cardinal, who is the finance minster at the Vatican.

The 74-year-old cardinal is not an accused in the case and had apologized twice for the church's handling of the sexual abuse cases that had their origins more than a decade ago.

The cardinal admitted that he had been aware of rumours about paedophile clergy and abuse complaints in the 1970s.

He said the higher authorities in the Catholic Church mostly ignored the complaints and gave the erring priest the benefit of doubt. He said too many allegations of abuse were "dismissed in absolutely scandalous circumstances."

Pell, however, appeared to defend the church as such, saying the abuses were personal faults rather than structural failings.

The cardinal denied last year allegations that he had tried to bribe a sex abuse victim to remain silent and that he had arranged for the transfer of an accused priest.

The Australian commission is investigating the child sex abuse incidents that happened in city of Ballarat in Victoria state.

Pell had served as a priest in Ballarat and had lived in a seminary where paedophile priest Gerald Ridsdale was also staying in the early 1970s.

The cardinal said the actions of former bishop of the Ballarat diocese, Ronald Mulkearns, were "a catastrophe for victims and the church".

"If effective action had been taken earlier an enormous amount of suffering would have been avoided," Pell said.

Mulkearns had allegedly moved paedophile priest Ridsdale from parish to parish, a BBC report said.