The usual reasons are given - protecting children and preventing other illegal activity, which is all well and good and commendable in theory. However there have been instances where the filter has been used to silence opposing political opinions, as well as prevent access to materials on subjective moral grounds (ie "hardcore" pornography, online gambling, discussion of suicides, etc) where the government has decided Aussies shouldn't do that sort of thing, which seems a bit puritanical and mildly thought police-y.
It's not like we're in an "actual dictatorship", by and large the representative democracy trundles along as best these things do, and the life and freedoms we enjoy in Australia make us incredibly privileged compared to much of the world. But this whole online censorship and thought policing our government seems fond of is something I disagree with. In addition to banning certain forms of speech and text, they're now pushing through an act that sets the stage for de-anonymising all users online with a government-issued "Digital ID", the next step presumably being making it illegal to provide and use anonymous web services in Australia. That has broad implications for things like Reporters Without Borders, corporate and government whistleblowers, etc.
Coupled with a historical record of every blocked or "suspect" DNS attempt, and these trends paint a dire picture for individuals who may have legitimate interests or even just curiosity about something like "how are drugs made." Handing this information to the federal government seems risky to me because I don't know what they're going to decide to make illegal to read and write about in the future. Our government has talked seriously about banning encryption many times over the years, and are currently at war against social media, so who knows what they'll do.
That doesn't mean I agree that people should get away with heinous acts or organised crime, but it's why I personally avoid using my ISP's DNS resolution in Australia. I don't exactly trust Google either, but I'd rather they deal with my DNS lookup than our technophobe government.
Sorry for the long rant, probably could have just left it at my first sentence, but it all touches on the one subject in Australian politics that really rubs me the wrong way, and most people I talk to here are of the mind "if you're not doing something wrong, there's nothing to worry about." Just, gah!