I don't live in Australia, but...
honestly, with even a 1mbps connection I can watch youtube if I want, pages load fine, and games? They rely on low latency, not high bandwidth. 2.9mbps is fine. However..
The BIG problems I see? (I'll use numbers from where I live in the US but I think Australia has similar problems).
1) People that can't get anything. Well, here in the US in reality most people who claim they can't get "anything" really can get wireless broadband from Verizon Wireless, but it's $60 for a 5GB cap, so really they can't get anything too good. Or there's satellite, it's also very costly. Bringing me to....
2) TOO EXPENSIVE. I have a aircard right now, on a grandfathered unlimited plan, and my speed is adequate -- around 1mbps. But, as I say above, people can't even get that any more. I keep it for the use on the road, but I also can't get anything much cheaper! I can get 40mbps service, but it's like $100 (it's fiber-to-the-node, with copper to the house). If I go from that to the minimum the cable *or* phone company will give, 1.5mbps, it's still something like $45 a month. They constantly advertise "$20 a month" but that is for like 3 months, then the price jacks up to normal. There's some cities here where, if you want to settle for like 1.5mbps or so it's about $15 a month. But not here!
What they should really do (both in Australia, and in the US) is, rather than making sure people who can already get a fast connection can get an even faster one, try to improve speeds for those whose best speed is below, say, 5mbps. And try to make an affordable option available as widely as possible. In Australia I think cost may be a bigger consideration!