Internet use in Australia, one of the most connected countries in the world, has fallen for the first time accompanied by a warning that demand might have levelled.

Market research firm Market Intelligence Strategy Centre's (MISC) index of internet usage fell three percent in the quarter ending June.

It was the first fall since the Internet Uptake Index was created in 1999.

Australia, with a population of about 20 million people, has about 70% penetration level despite problems with the roll-out of broadband.

The country has long been used as a testing ground for new technology by Japanese and US companies.

'Serious slowdown'

The survey showed about 300,000 fewer Australian internet users logged-on in the quarter, with home usage falling dramatically while business users continued to grow.

There had been a sharp decline in growth in the previous quarter, which was played down because of the strong, often double digit, growth up to that time.

"While the fall may not seem immediately significant, in the context of regular quarterly growth rates of 20% that have been shown by the index in the past, it is a serious and unprecedented correction," MISC said in a statement.

The company said usage might receive a boost when new technology, like 3G mobile phones, becomes more widely available, citing a rapid growth in text messaging.

Tighter controls over content, the collapse of a number of internet service providers (ISPs) and a number of high profile online fraud cases were also blamed for the fall.