Web Latency Vs VPS Speed [on hold]

This is a toughest decision for me and I have been going back and forth trying to understand which one is more important - Latency Vs VPS Power

Most of my users are from Australia and the Aussie servers are incredibly expensive when compared to hosting providers in US. For my budged of $80/- per month, I have the following options:

1) I can get a server in Australia with really low latency for my users (like 40 ms) but the VPS will have half the RAM and CPU cores I can get in US hosting provider.

2) For the same budget, I can get a VPS machine with double the RAM and double the VPS cores from a datacentre situated in US, but the latency to Sydney will rise upto 220-250ms!

Other aspects doesnt bother me like bandwidth limit, SSD limit, etc..

Now, I dont know what to do here. Which one do I give more importance to? Which one of these are the bottleneck that can affect my user's experience the most? Would a low latency has more effect or can a high power machine make up for the high latency?

I have read many forums and articles trying to understand the effects of each of these but couldnt draw a line of which one is more of a bottleneck out these 2 and which one is more important than the other. Can someone please shed some lights from your experience plz... I am so confused and dont know what to do next..