Until yesterday the town of Bundanoon (population 2,500) was best known as the host of Australia’s version of the Highland Games. Now it has become the world’s first place to ban bottled water.

At a public meeting last night its people agreed to back the ban, which will mean local businesses will stop selling bottled water and visitors will be discouraged from drinking it. Instead, they will be provided with bottles labelled “Bundy on tap” that can be refilled with water from taps and filtered water fountains on the main street.

“It’s a moral thing,” said Huw Kingston, the owner of a coffee-and-bicycle shop who had already stopped selling bottled water. “It’s not easy to do when you’re running a business in a small country town — a thousand dollars is a thousand dollars.

“But the sale of still bottled water is a fantastic con by the beverage industry — convincing people to spend A$3.50 [£1.70] to buy essentially the water that comes out of a tap.” Until recently it seemed that the world’s love affair with bottled water would never end.

Sales in Australia increased by 10 per cent last year, with Australians spending more than A $500 million on still and sparkling water.

This goes against the trend in the northern hemisphere, where sales have begun to fall.

In April Nestlé, whose brands include Perrier and San Pellegrino, nicknamed the “champagne of waters”, reported that sales of its water fell by 4.1 per cent in the first three months of the year, with Western Europe particularly badly hit. Sales of bottled water in Britain — which had rocketed from 30 million litres in 1980 to 1.3 billion litres in 2007 — fell by 9 per cent last year as consumers reacted to high prices and the environmental impact.

Millions of plastic bottles fill landfill sites and litter the oceans.

What went down the wrong way in Bundanoon was when the beverage company Norlex Holdings announced plans to tap an aquifer in the town and transport the water 120 miles to Sydney for bottling.

The proposal was turned down after residents objected — giving rise to the “Bundy on tap” movement. The company appealed and the case is awaiting a ruling.

“Norlex wanted to truck millions of litres of water out of the bore here, stick it in bottles and bring it back to sell to us,” said Mr Kingston. “It became a big issue in this town.”

John Dee, an environmental activist who was behind a ban on plastic bags in Tasmania, said: “The main idea is to get people thinking about their usage of bottled water — environmentally, it makes no sense.”

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