The James Hardie asbestos victims’ compensation fund will be topped up with a government loan of up to $320 million to cover short-term payouts.

Under an arrangement between the Commonwealth and NSW governments, repayment is required from James Hardie Industries by 2020.

The compensation deal agreed in 2007 allows James Hardie Industries to suspend payments when its cash flows fall and pay in instalments instead of lump sums.

In the past year the building supplies company’s cash flows have been squeezed by its exposure to the depressed US housing industry and the Federal Government had expressed concern the fund could run out of money within the next 12 months.