Bundanoon, a picturesque rural town with a population of just 2,000, was expected to vote heavily in favour of the move with a show of hands at a public meeting later.

"At the moment we've got a lot of community support behind it. We're confident the town is going to back it," said activist John Dee.

"We believe Bundanoon is the world's first town that has got its retailers to ban bottled water. We haven't found it anywhere else."

Local opinion was incensed when beverage company Norlex Holdings announced plans to tap an underground reservoir in the town, truck the water up to Sydney and then send it back in bottled form.

"The company has been looking to extract water locally, bottle it in Sydney and bring it back here to sell it again," said Dee.

"It made people look at the environmental impact of bottled water and the community has been quite vocal about it."

Dee, whose Do Something group was instrumental in a plastic bags ban in Coles Bay, Tasmania, said he hoped the ban would make people think twice about buying bottled water.

"It's possible it will extend to other places. The main idea is to get people thinking about their usage of bottled water -- we're spending about half a billion dollars on it here in Australia," he said.

Retailers in the New South Wales town, south of Sydney, have already agreed to stop stocking bottled water.

Activists say bottling water causes unnecessary use of plastics and fuel for transport. A New South Wales study found that in 2006, the industry was responsible for releasing 60,000 tonnes of gases blamed for global warming.

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