People have been avoiding Dubbo because they believe there is no water in the city, NSW opposition leader Jodi McKay claimed on Tuesday.
"We know that visitors are not coming to Dubbo because they believe there is no water here."
The Labor leader accused Water Minister Melinda Pavey of "firing a broadside" at Dubbo Regional Council (DRC) in a Sydney newspaper last month, after it published details of correspondence between the Minister and council, in which she urged the council to increase water restrictions.
Advice to the government, which suggested the council was not working quickly enough to respond to the water crisis, was also published in the media.
"This has caused significant reputational damage to Dubbo," Ms McKay said.
When asked if Labor had any proposals to deal with water crisis or alternative policies, Ms McKay failed to name any.
Ms Pavey declined to respond to Ms McKay's remarks on Tuesday, but she told the Daily Liberal councils were responsible for town water supplies.
"The state government has invested over $40 million for immediate water security infrastructure to help secure the dwindling water supply in Dubbo," Ms Pavey said.
"The advice that came to my office was that council had not done any work on the $30 million for the bore field project announced in June this year.
"Dubbo will now have to run their water on the smell of an oily rag, until the work is complete."
Ms Pavey said she wrote to all NSW councils in June to urge them onto water restrictions and to ask what the state could do to help them.
"DRC did not respond," she said.
"Since we raised concerns over the past two weeks, our water commissioner is more confident that Dubbo is now on track...largely due to the good will of the Dubbo community, especially farmers who have donated their own water to the town supply."
DRC's chief executive officer Michael McMahon confirmed the council received a letter from Ms Pavey in June and said a response was sent to relevant government agencies.
"Additionally, mayor Ben Shields did receive a letter last month from the Minister where she raised a number of issues that directly affected the region, which the mayor responded to on the same day," he said.
The council had spent all of 2019 working to address the water crisis, Mr McMahon said.