Their position in China is not offering iCloud at all is no better than offering iCloud where the data is managed by a Chinese company. Importantly, this does not affect anyone outside of China. This compromise to follow the law sucks, but it doesn't fundamentally weaken protections for anyone else. And of course iCloud is optional and can be turned off by any Chinese citizen who doesn't want their data stored on Chinese servers.

Altering the OS to install a backdoor is a much different beast. It's non-optional, fundamentally weakens the security of the entire OS, and affects all customers everywhere, not just Australian citizens.

Also, if Apple did withdraw from Australia, any Australian citizen who wished to use an iPhone could still acquire one from overseas (though this is admittedly a fair amount of effort) and they'd continue to have a secure computing experience.