My intuition is on your side though, I imagine they are far less damaging than normal cigarettes.
Of course they have. There has been solid evidence of the harm of tobacco cigarettes for decades. Smoking bans are well supported by the evidence. Any restrictions on e-cigarettes is not.
In this case, we are erring on the side of caution and banning e-cigs until they are further studied. Learning from our mistakes.
Also, they aren't banned. The FDA just made it so small businesses wouldn't be able to make the ecig products (basically). Big tabacco, however, is able to take the hit. Take it how you will.
Keep in mind this article is about Australia too. We have a much tighter and more strict food and consumables regulatory body which has typically served us well. It wouldn't make sense for us to strongly fight against cigarettes and then just let some new inhaled product on the market without studies showing they're okay.
Another part of the regulation impetus was that they were uncertified electronic devices which no matter the purpose is fairly tightly regulated as well.