Labor and the unions say a royal commission set to be announced by Tony Abbott is an expensive witch-hunt into corruption claims that should be investigated by police.

News Corp Australia reports the prime minister this week will announce a royal commission into unions, with the terms of reference to investigate bribes, secret commissions, corruption and slush funds.

Former High Court justice John Dyson Heydon will head the 12-month inquiry, which will have the power to compel union leaders to give evidence.

Australian Council of Trade Unions president Ged Kearney said the government would spend $100 million on the royal commission “for their own political purposes”, when it should be police who probe union corruption.

She linked the commission to the coalition’s recent attack on “overgenerous” enterprise agreements at companies such as SPC Ardmona, and its Fair Work Commission submission calling for a rethink on penalty rates.

“Australians are very cynical about this,” she told reporters in Melbourne.

“They’ll know this for what this is. This is nothing but a witch-hunt designed to weaken unions to stop unions standing up for decent wages so that Australians can maintain a decent standard of living.”

Talk of a royal commission into unions – rather than the promised judicial inquiry into the Australian Workers’ Union slush fund scandal – gained momentum with recent allegations of corruption within the Construction, Forestry, Mining and Energy Union (CFMEU).

But Attorney-General George Brandis on Sunday stopped short of announcing a royal commission, instead saying: “Watch this space”.

“You have judicial inquiries or royal commissions where there is a systematic and ingrained cultural pattern within an institution that needs to be exposed,” Senator Brandis told Sky News.

Opposition Leader Bill Shorten called on the government to launch an immediate joint police taskforce into allegations construction union officials have been involved in improper deals, including bribery and kickbacks.

“Unlike police, royal commissions do not have the power to arrest, charge or prosecute,” Mr Shorten said.

Labor’s workplace relations spokesperson Brendan O’Connor questioned the need for a royal commission.

“This seems to be a highly politicised, very expensive exercise,” he told ABC television.

He said that when Mr Abbott was workplace relations minister in the Howard government, he set up the Cole royal commission into corruption in the building industry in 2001.

“It cost $66 million of taxpayers’ money. It did not lead to one serious criminal conviction,” Mr O’Connor said.

The Australian Greens also called for a police investigation, saying a royal commission would backfire.

“The Australian people will see (a royal commission) for what it is, the first step in the government’s assault on wages and conditions,” Greens deputy leader Adam Bandt said.