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/Peo, FreeWebSpace.net
I don't know of any Autralia-specific free host, but there are plenty of free web hosts (currently under construction) that will host your site no matter where you are located (I use Awardspace).
Bandwidth in Australia is more precious than gold! Thats why being an Australian myself, we provide free hosting using US servers because they are much more affordable with the same quality.
I cannot even begin to express my utter disappointment at the price of bandwidth in Australia, all I can say that its not justified. We have local clients being hosted in the US and they have not expressed any concerns with latency or stability. Hardware will fail no matter what its geographic location is, you just need to put faith in the people that are managing it.
Australians generally expect a high of level of standard especially if they are paying hard earned cash for it. Some users have criticised our strict criterias with accepting freehosting, they fail to see the bigger picture and that is to maintain the highest level of quality.
Zoomcities evolved roughly the same time as iContact-Hosting did and I have seen plenty of positive feedbacks regarding their services and instead of looking at it negatively from a business perspective, we choose to look at it as a positive representation from a collective group of Australian hosts.
Only the big name hosting companies use aussie servers. I reckon most aussie sites are hosted on ISP servers, since they pay for it with their internet.
Most people that have a personal website are hosted overseas, Its just the big businesses that choose to host with ISP's, Australian Hosting Companies or just using there own servers on there connection. It works out cheaper from using a server on your location if you have a fast enough connection, that is unlikly.
I mean for $9.90AUD your getting 50GB of bandwidth & 2.5GB space, and the servers are in Australia!
I know your prob looking for free hosting, but for $9.90AUD thats pretty damn cheap, when I first started out I used them to host my sites and obviously being 16 at the time I didn't have a credit card or PayPal or anything of the sort. But as the host is based in Australia you can pay via bank deposit from any bank in Australia.