Commissioner Dyson Heydon recommended charges be considered against Mr Setka, state secretary of the Construction Forestry, Mining and Energy Union, along with his assistant Shaun Reardon and a number of other top CFMEU officials from around Australia.

It comes as the Abbott government released a wide-ranging review of Australia's industrial relations system with the Productivity Commission asked to consider improvements to how Labor's Fair Work laws are operating.

The terms of reference, released late on Friday, include asking the Productivity Commission to assess how the laws affect job creation, productivity, competitiveness, the safety net and the needs of small business. The government said any changes to the laws would be taken to the next election.

Employers welcomed the Productivity Commission inquiry but unions warned it was part of an attempt to undermine wages and conditions and ACTU secretary Dave Oliver said the ultimate goal was "attacking the pay packets of workers around this nation".

ACTU president Ged Kearney, meanwhile, condemned the Royal Commission into Trade Union Governance and Corruption report saying it was "a political exercise" to weaken trade unions and a "desperate" attempt to make something out of nothing. "We absolutely do not hold that there is widespread corruption in the union movement," she said.

The 1817 page interim report by Justice Heydon identified key concerns about the use and operation of union election slush funds. They include that they operate largely in secret, have deficient or non-existent record-keeping and that candidates commonly plead ignorance on how money is raised and spent.

The report also recommended fraud charges be considered against former Australian Workers Union officials Bruce Wilson and Ralph Blewitt for their use of a secret slush fund in the 1990s. Mr Wilson was the ex-boyfriend of former prime minister Julia Gillard.

Justice Heydon said there were no grounds for prosecuting Ms Gillard, but agreed with counsel assisting Jeremy Stoljar's submission, that her conduct as a solicitor had been "questionable". Ms Gillard had done legal work setting up the slush fund for Mr Wilson and Mr Blewitt.

The report recommended seven past and present Health Services Union officials should be considered for charges for their role in an alleged right of entry scam. They include secretary of the Victorian No.1 branch Diana Asmar who was re-elected with 93 per cent of the vote this week.

The commission did not make any recommendations against Kathy Jackson, despite detailed allegations of massive theft against her.

A key focus was the CFMEU and the report recommended charges of blackmail for alleged demands that construction materials multinational Boral stop supplying concrete to construction giant Grocon be considered for senior officials Mr Setka and Mr Reardon.

The CFMEU in Victoria has been in a long-running dispute with Grocon.

Justice Heydon has also recommended that charges be considered against Darren Greenfield, from the CFMEU's NSW branch, for using a telephone to make death threats to his former colleague, Brian Fitzpatrick.

NSW CFMEU boss Brian Parker was also criticised for gross misbehaviour and gross neglect of his duty and "should be removed from office".

Queensland CFMEU officials Michael Ravbar and Peter Close are recommended to face prosecution for charges including extortion.

A third volume of Justice Heydon's report was not released as it dealt with "serious criminal matters" and making it public would endanger the safety of some people referred to in it.

CFMEU national construction secretary Dave Noonan said the commission was "not a court of law and does not exercise judicial power" and made no findings of corruption against any CFMEU official. He said it was a "colossal" waste of money.

"Like previous royal commissions, the Heydon commission is politically motivated to produce outcomes to justify the introduction of anti union laws," he said. "This is clear from the prejudiced and biased findings of the royal commission that reflect the ideological bent of the Abbott government and their hatred of unions."

with Chloe Booker