At which level (D or E) should I apply for an advertised faculty position in Australia?

It is my understanding that when a position is advertised so broadly, i.e. D or E, they are likely looking for someone really big. That being said, I think they are likely looking for someone at the level E, but would consider a strong candidate at level D.

If it were me, I would evaluate my qualifications and fit with both D and E positions honestly, and then put all my effort into whichever feels like the best fit.

If the only motivation to try for E is salary, and you probably fit better for D, then you are likely risking both.

You should be very careful in deciding whether you would be happy at the lower level. Australian academic levels are quite distinct, and transitioning to a higher level is not a simple case of applying for a promotion: you essentially need to have your role re-graded, and the process can take 2 years.

There are typically very few full professors (grade E) in a School or Department, and it is a big deal when a new position is offered at a Go8 university. Expect a lot of competition from people with international reputations in the field. Often potential candidates are approached by representatives of the university, so if you are considering an advertised position be aware that you may well be an outsider to done prime contenders.