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Tairua holidaymakers have been warned they could contract illnesses such as diarrhoea from drinking unsafe tap water.
The Thames Coromandel District Council (TCDC) is playing down the "boil water" notice issued for Tairua, saying it is precautionary in case low-quality water has to be taken from local streams to meet demand.
Over the holidays the population of Tairua can increase eight to tenfold from its usual 2700.
Just before Christmas, the council told Tairua residents their tap water could be contaminated. The boil water notice has angered some business owners, who say they had to scramble to cope with the problem.
They said water shortages were a regular problem. Donna Early, who runs a dive shop, said several residents had stomach upsets.
"TCDC are saying it's not really that much of a drama. Who are we meant to be believing? As a resident I find that really concerning."
Cafes and restaurants are having to take extra care, and accommodation providers are cutting washing and laundry facilities.
Occasional showers and temperatures in the 20s are predicted for the Coromandel for the rest of the week.
Council communications manager Peter Hazael said water supply was a perennial Coromandel problem. Tairua had been tapping into local rivers to try to preserve reservoir water for emergencies such as firefighting, but falling river levels meant the council had been forced to run pipes into other streams.
That water was not pure, so in anticipation of it being tapped into, the council had issued the boil water notice, Mr Hazael said.
"Since that time things have calmed down a little bit. The demand is still there but, working 24/7, we have managed to get a bit more of a bolster there to take us through to the end of next week, we hope.
"Even though we've been chlorinating the water and disinfecting the water we're still concerned we might have to take water from other streams so we've kept the boiled water notice in place."
The alternative was to use tankers. The notice would be reviewed after the peak holiday time, about January 6.