CANBERRA - Australia is discovering hamlet power. First it was the tiny Tasmanian township of Coles Bay, population 200, which nine years ago led a burgeoning national movement to ban plastic shopping bags.

Now it is the 2500 people of Bundanoon, in the Southern Highlands southwest of Sydney.

On Wednesday night the town voted to outlaw bottled water, shaking the A$460 million-a-year ($572 million) Australian industry like the mouse that roared.

Yesterday, New South Wales Premier Nathan Rees responded by announcing an immediate ban on state government purchases of bottled water, including refills for the thousands of water coolers that act as office networking hubs.

If plastic shopping bags are any indicator, worse may be in store for bottled water.

In 2003 Coles Bay baker Ben Kearney led a revolt in the main street of a hamlet whose shopping centre of bakery, pub, supermarket and post office attracts up to 200,000 visitors a year.

Kearney and fellow shopkeepers enlisted the aid of environmental group Planet Ark to replace the town's annual distribution of 350,000 plastic shopping bags with locally designed cloth and paper alternatives.

They gave locals five free bags each and declared Coles Bay the nation's first plastic bag-free town.

In 2005 Kearney was named Tasmanian of the Year and won the Local Hero Award in that year's Australia Day awards.

Across Bass Strait, Coles Bay inspired South Australia's Labor Government - headed by expatriate New Zealander Mike Rann - to follow suit with a statewide ban on plastic checkout bags.

A new law introducing on-the-spot fines for shops handing out the bags came into force in May, adding pressure on Prime Minister Kevin Rudd to make good his election promise to introduce a national ban.

Rudd's enthusiasm cooled after federal and state environment ministers failed to reach agreement. Undeterred, retail giant Target stopped offering its customers plastic bags last month, replacing them with reusable and compostable alternatives costing between A10c and A$3.

Within a month of the announcement in May, Target sold more than 80,000 reusable bags, raising more than A$100,000 for charity.

Now it's the turn of bottled water, the subject of criticism for their contribution to landfills and claims of an excessive carbon footprint. This year, the nation will drink more than 240 megalitres of water contained in plastic bottles that government figures say each consume about 200 millilitres of oil in production, transport and refrigeration.

The bottled water industry disputes this, claiming that the real figure is smaller by a factor of three, that its bottles comprise less than 0.3 per cent of the nation's landfills, and that they are completely recyclable.

Bundanoon was having none of it.

Irked by a proposal to draw water from a local aquifer to supply the bottling industry, the town rallied to ban the sale of bottled water and to replace them with filtered drinking fountains.

Rees leapt on to the bandwagon, following an instruction to state ministerial offices in downtown Sydney to use only tap water.

"After all, our tap water is among the best in the world and tastes even better," Rees said.

Public support is a little less certain. A poll on yesterday showed almost 60 per cent of respondents disagreed with Rees.

Said Sherlock of Sydney: "This is nothing but the nanny state in action again."