Documents obtained by the ABC show the Prime Minister approved Tony Abbott's plan to send decades-old RAAF housing to Borroloola.

Mr Morrison also agreed to "deploy the Australian Army to immediately assess the situation on the ground", according to a Department of Prime Minister and Cabinet letter, dated October 31.

But in a separate letter tabled in the Senate on Thursday, Finance Minister Mathias Cormann said the plan to send the 12 decommissioned RAAF houses from Darwin to Borroloola was ditched following meetings with NT Government officials and community representatives last week.

"The Government is not pursing the purchase of any former Royal Australian Air Force houses for use in Borroloola," Senator Cormann stated.

The plan was hatched by the Special Envoy on Indigenous Affairs, Tony Abbott, after his September visit to the community, 700 kilometres south-east of Darwin.

"The housing in Borroloola is appalling, the worst I've seen anywhere in remote Australia," Mr Abbott said earlier this month, when he first hinted at a "new initiative" to improve conditions there.

Neither Mr Abbott nor Indigenous Affairs Minister Nigel Scullion would provide further details despite repeated requests from the ABC.

The newly obtained documents show the Parliamentary Standing Committee on Public Works held a meeting on November 2 to assess the project.

"The information is limited and does not contain the usual amount of information expected for a medium works however the Prime Minister, the Hon Scott Morrison MP, has identified this work as a priority and the Department of Prime Minister and Cabinet has requested that this process be expedited," a committee document shows.

The document also said the 19th Chief Engineer Works of the Australian Army, which includes civil engineers, construction supervisors and surveyors, would be deployed to oversee the project.

The total cost was estimated at between $8 million and $10 million.

When told last week about the prospect of 12 former RAAF houses being sent to the community, some residents expressed excitement, saying any housing was better than no housing.

But other residents said they did not want "old rusty houses".

On Thursday, Mr Abbott told reporters in the Queensland town of Cherbourg:

"My understanding is that the former Air Force housing is probably not suitable on closer examination."

'Incredibly disheartening'

Labor's Northern Territory senator Malarndirri McCarthy, who grew up in Borroloola, last week questioned the appropriateness of sending decades-old housing to the community.

She said residents were being left confused by the Government's decision to abandon the project.

"It's incredibly disheartening for the families of Borroloola," she said.

"They desperately need homes and they have been saying that consistently for so long, to all sides of Government.

"In the past seven days their hopes were lifted, and I think it would be extremely disappointing if Special Envoy Tony Abbott backpedals and steps away from that commitment."

In 2009, $14.6 million of Commonwealth funding was allocated to Borroloola housing improvements, but the money has never been spent.

Senator Scullion has blamed the lack of progress on the Northern Territory Government, but the Territory Government says it is pushing ahead with the construction of 38 new or replacement homes.

SourceABC16 November 2018