> Will this harm the inverter?
No. It shorts one of the relay contacts, meaning it never has significant current flowing through it.
> what are drawbacks of this wiring?
It depends on your local power supply method. If as most of Australia you have MEN (Multiple Earhed Neutral, also called MGN in North America), which is a form of TN-C-S, then connecting AC-in N and AC-out N is OK and safe. That's because you have a separate connection from neutral to earth, and you won't be relying on the earth connection at the transformer, which could be cut by activity far from your premises, and not be aware of the danger.
If however you have the TN-S* earthing system that is common but not universal in South Africa, where the incoming main breaker is double pole (switching neutral as well as active), then you must not connect AC-in and AC-out neutrals, as you would then be relying on the transformer's connection to earth, and this will be unsafe and illegal. In these cases, you have to connect AC-out neutral to a suitable local earth (proper earth stake, there will be local regulations for this), only when
AC-out is not already connected to AC-in. Failure to do this properly will result in non-fault currents through earth conductors, which are not designed for this. It will also play havoc with residual current detectors.
[ Edit: *I hope I got that right. I'm relying on this post
by a well regarded poster (who seems to have changed his name to underscore recently). ]
[ Edit: added "TN-S" for the earthing system common in South Africa. Also added "but not universal". ]
MG ZS EV 2021 April 2021.
Nissan Leaf 2012 with new battery May 2019.
5650 W solar, 2xPIP-4048MS inverters, 16 kWh battery.
1.4 kW solar with 1.2 kW Latronics inverter and FIT.
Patching PIP-4048/5048 inverter-chargers.