The mayor of NT outback town Katherine hopes a compensation settlement will comfort residents worried about chemicals used in firefighting foam from the local air force base.

Most of the town's almost 7000 residents were part of the multimillion-dollar class action against the Australian Defence Force over the use of PFAS (per-and poly-fluoroalkyl) chemicals that contaminated groundwater.

The federal government said an in-principle agreement has been reached and a confidential settlement is being finalised for Federal Court class actions over PFAS contamination at Williamtown in NSW, Oakey in Queensland, and Katherine.

"Hopefully the compensation will alleviate some stress on these people as far as their properties values are concerned," Katherine Town Council mayor Fay Miller told AAP.

"I don't know that you could ever totally relieve that underlying stress about their ongoing health because we don't know exactly what ongoing issues there will be with health and that's a very emotional problem for a lot of people.

"Some people have raised children in those contaminated areas, thinking they were doing the right thing bringing kids up in a great environment by being self-contained and of course they had contaminated water."

Katherine Council is part of the class action but Ms Miller has defended the ADF during the course of the controversy, arguing they have always kept the council and public well informed.

Prime Minister Scott Morrison visited RAAF Base Tindal in Katherine last week to announce almost $1.2 billion in funding to boost capacity for joint US operations at northern Australia's most important strategic air force base.

© AAP 2020