PFAS chemicals, which have been used in products, do not break down, instead accumulating in soil, water and the human body where they have been linked to higher rates of cancer, reports Xinhua news agency.
The lawsuit against the government, which was set to begin in the Federal Court on Monday, claimed the Department of Defence exposed the communities to the poisonous chemicals through firefighting foam used at military bases.
Prime Minister Anthony Albanese acknowledged that the use of PFAS had caused suffering across the country.
"People have, across a range of communities, suffered from the use of this," he told reporters.
"The biggest concern that I have with PFAS isn't, of course, a financial one -- it is the health outcomes of people who are affected by it."
Craig Allsopp, joint head of class actions at Shine Lawyers who represented the seven communities, said the positive outcome is subject to approval by the court.
"The settlement money, if approved, will go some way to compensate the seven communities in this class action for their losses. However, many are still stuck on contaminated land," he said.
Canberra, May 15
The Australian government on Monday agreed to pay A$132.7 million ($88 million) to about 30,000 residents of seven communities across the country who were suing the Department of Defence over its responsibility for the spread of per- and polyfluoroalkyl substances (PFAS) into their soil and groundwater.
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