In a decision met with outrage from locals, returned servicemen and ethnic groups, Waverley Council voted 6-5 against the proposal, declaring the popular beach should remain clear of flags to "remove provocation".
The Australian flag and an Aboriginal flag were to be provided by Liberal MP Malcolm Turnbull, who yesterday led a chorus of opposition to the decision.
He described the decision as "ridiculous" and remained hopeful council would do a backflip in the face of public backlash.
"It was just politically correctness which is sadly what you get often from the Left on councils."
But an unapologetic Mr Copeland said the council remained concerned about a repeat of the Cronulla racial violence.
"The Australian flag was used by both sides as a symbol around which to perpetrate racial violence," Mr Copeland said.
"The people from Lakemba burnt the flag and the Cronulla people swathed themselves in it while pounding people. We didn't want to wave a red rag in front of either side on New Year's Eve."
Police Association president Bob Pritchard said he could not envisage any context under which the Australian flag would incite racial tensions.
"This is political correctness taken to the extreme and is wrong."