With an estimated 40,000 Australians expected to die in a third wave of asbestos-related disease following contact with the material in their homes and workplaces, the National Commission of Audit recommended earlier this month that the only Commonwealth body addressing asbestos management and safety be abolished as a cost-saving measure.

The federal budget confirmed it is one of a number of agencies facing the axe because the Coalition considers them to be “window dressing” and says they are being “misused for public relations purposes”.

Head of the agency Peter Tighe said he had been shocked by the announcement to abolish it, noting that no one from the Department of Finance had contacted him or his staff to discuss their work prior to the Commission of Audit or the budget. The agency was set up last year with a $12 million budget over four years plus $3 million to deliver a national strategic plan.

Mr Tighe has spent nine months in the new job and has already taken a particular interest in Canberra’s pressing problem of 1050 homes containing remnant loose amosite asbestos in the form of Mr Fluffy insulation. Mr Tighe has labelled these homes unliveable and has called on the ACT and Commonwealth governments to come together to seek a solution for affected families.

Meanwhile, asbestos disease support groups have warned of the human cost of abandoning a whole-of-government approach and accused the Coalition of a split over the issue.

When Labor set up the agency last year following the recommendations of a two-year review into Australia’s asbestos problems, it received bipartisan support from the Coalition.

At the time the legislation was being tabled, Liberal Senator Eric Abetz told the Senate: “Now that we as a community are fully aware of all the dangers of asbestos and the effects that it has on people exposed to it, it makes good sense for all sides of politics and for unions and employers to join together to try to overcome the legacy issues that are clearly out there. Those legacy issues will remain with us as a country for at least another 30 years.”

Senator Abetz also highlighted the flaws in the existing approach to asbestos management throughout Australia. "The involvement of multiple governments across these diverse areas means that efforts to date to address asbestos issues have been fragmented and duplicative," he said.

Senator Abetz is now the Employment Minister in charge of the agency. A spokeswoman said on Thursday: "The Commission of Audit's proposals are recommendations to government; they are not recommendations by government. No decisions have yet been made in relation to the agency. The government remains committed to working with the states and territories to remove asbestos risks and this will not change."

But seven asbestos disease support groups – including the Bernie Banton Foundation, Asbestos Diseases Society of Australia and the Asbestos Victims Association – warned there would be a human cost of abandoning a whole-of-government approach. They are joined by the Construction, Forestry, Mining and Energy Union, which has also called for continued funding of the agency to maintain safeguards for workers.

Australia has the highest per capita rate of asbestos diseases in the world, with the deadly substance still found in millions of homes and workplaces.

Asbestos has claimed the lives of more than 33,000 Australians, and the groups said in a joint statement “an independent, national agency is a significant step in the fight against asbestos diseases, providing a strong, focused, consistent, co-ordinated national approach to improved asbestos education and removal activities”.

ACT Work Safety Commissioner Mark McCabe, who is the local appointee to the agency, said it would be “a huge loss if the agency folded”.

“It is co-ordinating a national response to the management of asbestos and taking a leadership role to ensure it is done appropriately," he said. "Without that, the potential is a continued fragmented approach to what is one of the most serious safety issues confronting our society”.

The head of the Fluffy Owners and Residents Action Group Brianna Heseltine said the agency had played a vital role in informing owners and residents about Mr Fluffy’s troubling legacy on their homes.

“Mr Tighe’s call for the demolition of our homes put Canberra on high alert about the serious health risks posed by the likelihood of ongoing loose-fill asbestos contamination, and drew attention to the absence of legislative protections for residents," she said. "The ACT government’s February 18 letter was conspicuously silent on the main issue at stake for our community – health – focusing instead on the increased burdens owners must bear when carrying out even minor internal works.

“Owners and residents are likely to feel left high and dry if the agency is abolished only weeks after putting this vital issue on the map.”