While politicians argued over aid to those affected by the equine influenza (EI) outbreak, the disease claimed its first racehorse fatality with the death of a gelding at Moonbi in northern NSW.

Adding to the crisis, high-profile Hunter Valley breeding farms are now bracing for the worst as the disease spreads to the studs and threatens to severely diminish this year's foal crop.

Prime Minister John Howard has called on NSW and Queensland to provide financial assistance after the federal government announced on Sunday a $110 million funding package.

Despite the NSW government receiving around $150 million per year in wagering taxes on thoroughbred, harness and greyhound racing, Premier Morris Iemma says the responsibility for aid lies with the federal government.

"This is a failure of quarantine - that's why the prime minister has announced a $110 million assistance package," Mr Iemma said.

The first case of EI in Australia was detected on August 23 in a stallion which had travelled from the northern hemisphere and was awaiting release from Sydney's Eastern Creek quarantine station.

How the disease got out of Eastern Creek and infiltrated the general horse populations of NSW and Queensland will be the subject of an inquiry to be conducted by retired High Court judge Ian Callinan.

Although the particular strain of EI in NSW and Queensland was believed to be milder than some, it was also believed to be potentially fatal to only old or very young horses.

Tip Of The Iceberg, a fit six-year-old who won at Coffs Harbour on July 29, had to be put down because he became so sick with the virus.

Lew Hyson, who trains at Moonbi near Tamworth, said all of the 18 horses at his stable had EI and it was affecting all differently.

Tip Of The Iceberg was the last to contract the virus on Wednesday but quickly became very sick and stopped eating and also developed colitis.

"We thought getting colitis might have been why he didn't handle it (EI) but the DPI (Department of Primary Industries) vets came out yesterday and did an autopsy and they said it was definitely respiratory failure," Hyson said.

"It was pretty upsetting.

"Maybe he's a freak case, I don't know."

Meanwhile leading studs Darley Australia and Emirates Park reported cases of EI despite adhering to the strict biosecurity measures put in place by the Department of Primary Industries.

Darley general manager Ollie Tait said it was obvious the virus was airborne after three yearlings were confirmed with the disease.

"It is apparent that the virus is airborne as our NSW property has been in lockdown for two weeks," Tait said.

Dr Shalabh Sahu, director of operations for Emirates Park, said a teaser pony and a Clydesdale mare with a foal at foot had been confirmed with EI.

"We introduced rigid quarantine procedures immediately on learning of the original EI outbreak in Sydney," Dr Sahu said.

"However, it would seem that the nature of this disease would clearly establish that containment fundamentally proves to be ineffective no matter what radical steps are put into place.

Hyson, Tait and Dr Sahu have all joined the push for vaccination of all horses.

However, Federal Agriculture minister Peter McGauran, says no decision on vaccination will be made for two or three weeks when the containment methods are reviewed.

Mr McGauran announced the $110 million financial package yesterday to assist people in NSW and Queensland who derive their living from horses, be it racehorses or sport horses.

NSW chief veterinary officer Bruce Christie said the ongoing horse standstill in NSW was working and had dramatically slowed the spread of the disease.

Victorian racing authorities on Monday called on the federal government to provide assistance for the industry in that state with Racing Victoria Limited chairman Graham Duff saying they were losing money while they provided the main support for the industry.