Why does it cost 199.00 for a Iphone 5S on Apple itself?

Hi
I live in Australia but I was recently browsing through Apple US and I found an At&T carrier model iPhone 5S would only cost 199.00 but it cost like $896 here in Australia even thought it not unlocked.

Here r links: http://store.apple.com/...05s%20-n@p

http://store.apple.com/...d-unlocked

Would it be cheaper to get one of those or is there to many disadvantages having a locked phone?

The only reason the phone is cheaper looking at it through AT&T is because it is on a contract so they subsidize the price.
I'm not sure if that's the case in Australia, but in Canada & the US, service providers will reduce the cost of your phone considerably if you agree to a contract of 1-2 years.
You could get one, but you would be locked into a contract with AT&T, and if you are living in Australia, you will get roaming charges for every text message, phone call, and data usage you get… And that would not be a pretty sight to see. If you cancelled your contract, you get hit with the cancellation fee which is whatever amount they subsidized the phone for.

When you sign up for a contract, you actually pay the full price for the phone, but you pay it in little pieces as part of your monthly subscription. If you buy a completely unlocked phone, you pay the entire price right up front. It's cheaper and more flexible to buy an unlocked phone at full price, but if your budget won't stretch to that, buying a phone with a contract is the next best thing.

US has contract prices with carriers, so its only that price if you sign a 2 year contract. (Which is a great deal imo as you aren't changing carriers anyways)

Just buy your phone direct from Apple US at $649 if you are passing through USA