I have heard that the examiners scan each students paper and only look at the copy. So, if you use pencil, the scanned copy will be really unclear and at times may cost you a mark or two. They will probably emphasise the use of pens.
Actually, I think while this may be true for other subjects, it may not be the case for ITSD. I saw a notification somewhere on the VCAA website saying further and biol exams were going to be scanned this year, and I know physics gets scanned which is why you are specifically asked to use blue or black pen (unless you press hard, you can't be guaranteed that pencil will show up on a screen after scanning)
But physics papers definitely have had a 'no writing allowed in this region' boundary on each exam page for the last few years, ITSD has not. I doubt they scan ITSD papers just based on the lack of people who take the subject each year, ~1000 is nothing compared to the 30k+ for further, etc.
That said, I still think it's a good idea to write in blue or black pen for all exams, since writing in pencil (while it may be allowable) is putting your responses at a greater risk of not being legible. If you are confident that your pencil can be well read, I'd say go for it, but pens are definitely suggested.