Acknowledging some of the homes would probably have to be demolished, Ms Gallagher said Cabinet would meet on Monday to settle details of the financial assistance, which would focus on the immediate needs of the 10 or more families who have prohibition notices on their homes after remnants of Mr Fluffy asbestos were discovered.

Commissioner for Public Administration Andrew Kefford would head the taskforce, and had been charged with helping families in immediate need and also advising the Government on whether homes should be demolished. The owners of all 1049 Mr Fluffy houses would be invited to register with the taskforce, which would also look at ongoing asbestos testing and reporting.

Ms Gallagher made it clear that the ACT’s response was “coordination and compassion”. Her Government insists that the Commonwealth must take responsibility and Ms Gallagher has sought an urgent meeting with Prime Minister Tony Abbott.

Workplace Safety Minister Simon Corbell stressed the problem “arises from decisions taken on the Commonwealth watch”, when it allowed “this dangerous carcinogen” to be pumped into people’s homes.

He likened the crisis to a slow rising flood, affecting house by house, with more and more families finding themselves in similar circumstances to the aftermath of a natural disaster. “This is an issue of growing complexity and magnitude,” he said, describing the contamination as much worse than the Government had imaged when it wrote to home owners four months ago.

Asked whether people still in their Mr Fluffy homes would be eligible for financial help, Ms Gallagher said her immediate focus was on displaced home owners, who were “living in temporary accommodation out of laundry baskets”, but cabinet would work through all of the requests put by the Fluffy Owners and Residents Action Group.

“These are hardworking Canberrans with young children whose lives have been turned upside down by the information that they have received in the last few months,” she said, comparing the crisis to the 2003 bushfires.

Mr Corbell met with Elisa and Marcus Thompson, a family with two children, who have been living in a hotel for five weeks with the help of the hotel and their parents, after a prohibition notice was put on their house. The couple have had four separate assessments of their Duffy home, with different results each time, the first two finding fibres in the subfloor but the third finding it had also migrated to their cupboards and heating. They were horrified that many families were still living in Mr Fluffy homes.

Mr Thompson is also a builder and said he had recently ripped out the subfloor of a house after being told it wasn’t a Mr Fluffy house, only to discover this week that it almost certainly was.

Mr Fluffy was a company that installed loose-fill asbestos, a dangerous carcinogen because of the ease with which the fibres become airborne, in homes in Canberra and neighbouring NSW towns during the 1960s and 1970s.

The Commonwealth funded a $100 million clean-up from 1989-1993 to remove the asbestos from the 1049 homes in the ACT, but last year discovered a Downer house missed in the clean-up. During demolition of that house, asbestos was found to have migrated down walls and through the property, prompting the Government to write to the 1049 homeowners, warning fibres might remain in their houses. As they have houses tested, families are finding just that, with some ordered to leave and others told to seal off parts of their house.

Towns in NSW, including Yass, Bungendore and Queanbeyan, were never cleared and still contain asbestos insulation in their ceilings.

Liberal Leader Jeremy Hanson has called for a $5 million assistance package for Mr Fluffy home owners and said on Wednesday he was disappointed with the Government’s announcement, which amounted to a single point of contact for families. “It’s been four months; it’s time to act,” he said.

Spokesperson for the residents group Brianna Heseltine said what families needed most was crisis assistance. “Four months seems four months too long,” she said. “We would have preferred to see some announcements on practical measures. People are living out of their homes, they don’t have children’s clothes or toys, and toys might seem trivial but to keep the spirits up at a time like this is actually crucial. I’m walking into homes with people who are fainting in front of me, people are just overwhelmed with shock and grief.”

Ms Heseltine said a Queanbeyan resident had made contact with her group and she called on others from Queanbeyan to do the same.