At the centre of the controversy are warnings contained in letters from the Australian Racing Board (ARB) to then agriculture minister Warren Truss that changes to quarantine arrangements - which included the use of private vets for inspections - ran the risk of introducing equine flu into Australia.
Extracts from the letters, published by The Australian newspaper, had the ARB repeatedly warning Mr Truss in 2004 and 2005 that changes to quarantine procedures, including the use of private vets, were exposing the country to equine flu.
The letters had ARB chairman Andrew Ramsden asking the minister why horses, required to stay in quarantine for two weeks, were inspected by private vets paid by the importers.
"This is totally unacceptable," he is reported to have written "Any quarantine function which requires veterinary input should be performed by an AQIS (Australian Quarantine Inspection Service) veterinary officer."
Mr Truss, in his written response to the ARB, is reported to have rejected the suggestion that Australia risked an outbreak like that which affected South Africa in 2003-04 because changes to quarantine service policy meant private vets were taking over the jobs once done by the service's veterinary officers.
The Australian quote Truss in one letter as saying: "The circumstance that led to the outbreak of equine influenza in the Republic of South Africa in 2003 could not occur under the AQIS post-arrival protocol.
"In the South African case, factors contributing to the outbreak included inadequate equine influenza vaccination prior to export, lack of adequate isolation in pre-export and post-arrival quarantine and movement of personnel, equipment and vehicles without any decontamination procedures."
He reportedly assured the racing board that the recommendations of the South African inquiry into its outbreak were "standard procedures in Australia's post-arrival protocol".
The federal government, in responding to the story, denied it ever gave a guarantee that a horse flu outbreak would never occur.
Federal Agriculture Minister Peter McGauran says a written assurance given by Mr Truss that Australia's stringent quarantine protocols could prevent a horse flu outbreak only related to one specific complaint.
Mr McGauran says Mr Truss's letter to the Australian Racing Board in 2005 was in response to its concerns about private vets replacing Australian Quarantine Inspection Service (AQIS) staff at Melbourne's Tullamarine Airport.
Mr McGauran says while a breakdown in quarantine procedures has since occurred, Mr Truss's assurance should not be taken out of context.
"I don't wish to in any way attempt to influence, let alone prejudice, the outcome of the Callinan Inquiry [into the current Australian outbreak],except to say that Mr Truss acted on advice at all times," he said.
"The Racing Board did not pursue this specific concern, which was not a condemnation of the whole system, in the two years afterwards whilst I was minister."
Mr Truss says he never guaranteed that Australia was immune from an outbreak of equine influenza.
"What I said was that the circumstances which occurred in South Africa could not be repeated in Australia because our protocols were much tougher," he says.
"Now, whether or not our problems in Australia have arisen because the protocols themselves were inadequate or because there was a breakdown in those protocols, is a matter that's currently under inquiry by Justice Callinan."
The racing industry has estimated its loss in the flu outbreak to date at $300 million.
It is likely that horse interests will take class actions against the federal government, which is responsible for quarantine services. Some have suggested the claims may amount to $A500 million.
Retired High Court judge Ian Callinan has already heard an opening address in his inquiry from assisting counsel Tony Meagher in which Mr Meagher said evidence would be presented showing a number of breaches in import and quarantine protocols.