The producers of Baywatch wanted to move the sex-and-surf drama from the beaches of Santa Monica, California, to the Sydney suburb of Avalon.

But many locals were outraged at the thought of the programme, which launched the career of actress Pamela Anderson, taking over their local beach.

The show filmed two episodes there last year, and residents complained of heavy-handed security, despite assurances from producers that they would refurbish the town's surf club.

Baywatch: Producers hope a move will bring new life to the show

The state government of neighbouring Queensland claims it has an agreement to for the show to move to the Gold Coast, after offering US$2m in inducements.

But reports in the US over the weekend claimed the show had decided to move to Hawaii instead - prompting prime minister John Howard to speak out.

"It'll be something of a metaphor for the difficult public attitudes we have in this country towards job creation," he said.

"Ultimately, that opportunity for more jobs and new investment, and a further exposure of a part of our society - a part of our beautiful beaches - to the world is lost."

He said the loss of Baywatch would be a blow for Australia's chances of attracting international investment.

"We can't simultaneously say an unemployment rate of 7.5% is too high, yet behave in an unwelcoming way towards opportunities that will generate more jobs.

Pamela Anderson: Baywatch turned her into an international celebrity

"It's not only governments that have responsibility in these areas, the whole community does.

"And if community attitudes still remain difficult and stubborn on some of these issues, then it makes the government's job that much harder."

Gold Coast officials have said they are still negotiating with Baywatch producers.

The nine-year old show has an audience of one billion viewers in 140 countries world-wide.