Downloaders can be prosecuted.

They wouldn't go after the users, just the domains and the host servers. Similar to shutting down TPB or other tracker site, they'd go after the site host. True enough, there wouldn't necessarily be risk to users of those sites, but if they escalated things enough (like if an authoritarian got elected and was so motivated....) they could start taking more severe punitive action. Who knows, they could amend the regulation to go after the users if they wanted - it's a dangerous precedent either way. Especially when the intent is to 'protect children', there's no limit to how far they might take it in the future.

Blocked servers are inaccessible to adults, too, which raises freedom of information issues.

I'm not familiar with Australian law but I don't think this really applies. Most countries with internet censorship laws don't have any guaranteed right to uncensored information. At least in the US, they don't have 'censorship' per se, but they do sometimes 'block' an offending site by seizing domains/servers/equipment, and they can force search engines de-list them if the offense is severe enough. If the server is beyond their reach, they can prosecute or sanction the person hosting the site to pressure them into compliance. I can imagine a social media site who refuses to age verify and that hosts pornographic content (cough cough lemmy cough cough) be pursued like a CSAM site.

Large scale piracy is illegal pretty much everywhere, meaning that the industry can go after the operators and get the servers offline. Not so here.

That doesn't mean they can't throw their weight around and bully self-hosters/small-time hobbyists and scare them into compliance. Any western country enacting a law like this could pressure their western trade partners to comply with enforcement efforts. And anyway it isn't necessarily about the practicality of enforcing the law, so much as giving prosecutors a long leash to make a lot of noise and scare small-time hobbyists out of hosting non compliant sites. Most people can't afford the headache, even if it isn't enforceable where they live.