Authorities in Hawke's Bay hope a full and thorough investigation will reveal how Havelock North's water supply became seriously contaminated.

The council have stepped up its water testing, following a major gastro bug outbreak.

READ MORE: Hastings District Council admits fault in gastro outbreak

Well over a thousand people have been affected by an unprecedented outbreak of suspected campylobacter from the town's drinking water.

The Hastings District Council still doesn't know how the campylobacter bug, which is passed on through faeces, got into the water supply.

All schools and daycare's will be shut today and tomorrow.

Two people remain in intensive care in Hawke's Bay Hospital, and one death is suspected to be linked to the illness.

It's been labelled by Hastings mayor Lawrence Yule as the worst contamination of water ever in New Zealand.

He said they must find out why this particular bore in Havelock North has been affected, for the first time in 30 years.

"In the next couple of days we will announce the terms of reference and the leaders of a full independent enquiry into what has happened.

"We are no further ahead in terms of understanding how this has happened."

Mr Yule is standing by the council's water testing systems, saying they follow best practice guidelines set by the Ministry of Health.

"We are following the New Zealand drinking water standards in the way we are monitoring our water.

"Since this has occurred, we have now increased our monitoring of all the Hastings water bores to daily."

Mr Yule said the council will establish a financial hardship fund for families and business owners struggling.

"Some people have been off work for days looking after sick children. If they're on their own, they haven't been able to work. They've had to buy supplies of medicine and a whole lot of other things as well."

The Hawke's Bay business community's hoping the region's reputation won't be permanently damaged.

Business Association marketing manager Aimee Stewart said the town centre has almost ground to a halt.

"It's really slow in the village. People are either too sick to go out - either if that's workers or people just coming out. Also people are worried about whether it's contagious or not."

Stewart said they can not equate what the brand damage has been as a whole.

"Hawkes Bay is known for being clean-green. It really looks at us being a really environmentally friendly destination."