"Wollongong and the Illawarra should certainly not be punished for the sins of the Labor Party," the Liberal leader told the Mercury.

Mr O'Farrell led a chorus of senior state Liberal figures yesterday trying to repair the political damage caused by public comments from Opposition Deputy Leader Julie Bishop and Opposition spokesman for local government Scott Morrison.

On Wednesday, Mr Morrison suggested Wollongong City Council did not deserve the grant - part of the Federal Government's $300 million Regional and Local Community Fund - because of this year's corruption scandal.

His comments, which sparked outrage across the region, were echoed the following day by Ms Bishop, who rubbed salt into the city's wounds by claiming the corruption scandal should have been taken into account when funding allocations were made.

Mr Morrison was forced to defend his stand in a letter to the editor published in the Mercury yesterday.

Yesterday, Ms Bishop was standing firm, saying Australian taxpayers were entitled to be informed of the basis upon which their funds were spent.

"That is why the Coalition has sought from the Federal Government specific details of its analysis and economic modelling that it has used to make a number of policy decisions this year," Ms Bishop said.

"The Coalition will continue to push for transparency in funding decisions. This would be of benefit to all taxpayers and ratepayers, including in Wollongong."

With NSW Labor clearly on the nose with the electorate, the Liberal Party believes at least two Labor-held seats in the region are winnable at the next election.

But Opposition spokesman for the Illawarra Greg Pearce conceded that the perception the federal Liberal Party was Wollongong-bashing was "not helpful" in the context of the next election.

"I think the money's great and I'm hoping the (council) administrators do their job as quickly as possible and get democracy back," Mr Pearce said.

South Coast Liberal MP Shelley Hancock said Wollongong and Shellharbour residents deserved their fair share of the $300 million stimulus package.

"The $2.15 million granted to Wollongong City Council by the Government has recently come under scrutiny, however I support any funding from the Federal Government to be spent on the South Coast and in the Illawarra," she said.