The main advantage is that it allows the governmental structure to efficiently reflect differences between regions. If one set of rules is more appropriate in one region and another in another then that can happen naturally. So this is a good system if that's an important factor.

I'd argue, though, that it isn't an important factor in Australia: the people of any Australian state are a lot like the people of any other, with similar needs that would probably be served by similar governments and laws.

This structure means lots of competition between territories. That could be an advantage if it keeps all of them on their toes. It's a disadvantage if they are, for instance, cutting special deals to attract industry away from each other.

It's most likely to be an advantage at a personal level if the quality of government is a factor in people choosing in which state to live, but I doubt it is in many cases. For companies I'd guess the special deal is more of a factor than the efficiency. So on balance this is likely to be more of a disadvantage than an advantage.

Cross-jurisdictional inconsistencies are another diadvantage. This can apply at the personal or corporate level. These problems are more serious if people are mobile between territories and if companies are trying to operate across state boundaries: this probably wasn't all that common in 1901 but is more common today and will continue to grow more common as the twenty-first century continues.