Apart from FBI raids, hosting the USA is a much better option.

I run a blog network (http://ozblogistan.com.au) on a pair of Linode VPSes out of their Fremont centre. I periodically reprice hosting in Australia, but basically bandwidth charges make it prohibitive to host locally for the amount of traffic I get.

I'm talking $100+/mth differences.

Still, independent backups are vital. I use tarsnap.