I have seen the same argument many times now. It is circular reasoning, in some cases begging the question (in the original meaning of begging the question - where the question assumes a particular conclusion).
people don’t need internet that fast, because they don’t use it for things that need it to be that fast
This overlooks the obvious fact that we can’t use speeds we don’t have, and services that require faster speeds won’t be built or be available in Australia if faster speeds aren’t available. Arguably, Australia has the greatest need for innovation that makes use of high-speed and reliable connections with plenty of upload capability due to the sparseness of population over the country. The easier it is for anyone, where ever they are, to access services electronically (particularly health services), the easier it becomes to live in regional or rural areas, and less traveling is required.
As to the potential for faster speeds to contribute to the economy, bolster Australia’s competitiveness, and save money there are plenty of possibilities. Many have undergone trials and tests, and are simply waiting for the speeds necessary to be put into use. Nick Ross at ABC Technology + Games has summarised this quite well. The list of application at Whirlpool are separated by speed tier.
In some ways, fibre broadband is similar to public transport. It has a substantial chicken-and-egg problem. Without the faster speeds or regular transport services, the service is not used. As it is not used, governments of some persuasions see this as an indicator of overallocation of resources, and reduce the funds spent. This might make sense if fast internet and public transport responded to supply and demand in the traditional ways, but they do not. There needs to be a threshold level of investment before use will take off, as well as support from many areas of the community and government. Simply throwing money at the issue, then proclaiming a few years later that the service is not wanted, is disingenuous. People and data travel to many different areas, and providing services to only a few areas, or a few good services among many bad services, will not encourage use.
Oh, and in case you think this is a minor issue: read the article by Nick Ross and the Whirlpool wiki page. Think about the potential applications - health benefits, economic benefits, environmental benefits. There was also the (now closed) petition to the Coalition to reconsider FTTH in September 2013. It gained 272,033 supporters, many of whom also described their personal and business use cases for faster and more reliable internet access. That is just over one out of every 100 people in Australia (for 2014 estimated population of 23.5 million).