Renting to short term tenants is not " illegal" as you claimed, as long as you declare the rent and don't overcrowd the apartments to comply with maximum number of residents.
The only probable drawback of renting to short term people is that you or your agent have to do entry and exit inspections and condition reports more often, may may take some time and trouble in preparing documentation + additional leasing fee to agent.
I think what Deltaberry was referring to in terms of it being illegal is that often you need planning approval to rent out an apartment on a short stay basis as it carries a different land use classification. Technically apartments are approved as permanent residential, and so if you are renting them out on a short term basis without the necessary Council approval to do so, it would be illegal. I'm sure there are that many apartments in the CBD doing this that the Council doesn't have the resources to enforce it so turns a blind eye. And tbh, who really cares?