The controversial proposal has divided the town of Toowoomba in the state of Queensland, which has faced water restrictions for a decade.

Local Mayor Dianne Thorley, who is leading the "Yes" campaign, said that without drought-breaking rains the town's dams could dry up within two years.

She insisted the 73 million dollar (US 55 million dollar) plan to pump purified wastewater back into the main reservoir for drinking was safe.

"Somewhere, sometime we have got to stand up and change the way we are doing things," she told AFP as the town prepared for the July 29 referendum.

"Otherwise our great grandchildren are going to be living in something like the Sahara desert."

A vocal "No" campaign opposes the proposal, and says there are unforeseeable health risks for the town's 100,000 residents.

"The scientists say it should be safe," said local councillor Keith Beer, one of three members of the nine-strong council that opposes the plan. "That is not good enough for me, for my kids and my grandkids."

Australia is in the midst of the third-worst drought in the country's history. The so-called Big Dry is affecting the eastern states of New South Wales, Victoria and Queensland, as well as South Australia and the southern island of Tasmania.

It has cost the rural economy five billion dollars and many regional communities in the world's driest inhabited continent are teetering on the brink of collapse.

Toowoomba City Council says the solution is recycling effluent and pumping it back into reservoirs for drinking -- a system known as planned indirect potable reuse.

The wastewater would pass through seven cleansing and treatment processes including ultraviolet disinfection, advanced oxidation and ultrafiltration before being pumped into the town's Cooby Dam.

It would remain in the reservoir for up to three years for testing, before being pumped through the town's existing water treatment plant.

The council says the process would remove viruses, bacteria and hormones from the water.

Supporters say it is more responsible than allowing partially treated effluent to flow into river systems and be used by other towns for drinking water often hundreds of kilometers (miles) away -- a common occurence.

Megan Hargreaves, a microbiologist at Queensland University of Technology, said recycled water was safe, but acknowledged people had to get over the "yuk factor."

"Safety wise there are no microbiological problems with recycled water," she said.

"My opinion is that recycled water is safer than the water in our dams because it has already been through a stringent treatment process."

Similar schemes are up and running elsewhere in the world.

Since 1976, authorities in Orange County, California have injected purified wastewater into an undergroud aquifer and since 1978, the Occoquan Reservoir in North Virginia has been topped up with recycled water.

In Singapore, one percent of supply has come from recycled water since 2003. But opponents say the scale of the Toowoomba project, under which 25 percent of the town's supply would be recycled, is unprecedented.

"Nowhere else in the world deliberately drinks water reclaimed from sewage to the degree proposed by Toowoomba," the No campaign website says. "Any water supply for over 100,000 people should use tried and proven methods. We are not guinea pigs."

Opponents are calling instead for new dams to be constructed, and a 33 kilometer (25 mile) pipeline to be built to bring water from a nearby reservoir.

Thorley acknowledged the vote would be tight.

"This is a quantum leap of faith for people," she said.

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