The error says that afAuth.authState is null which does not match the expected type Observable<firebase.User | null> (which means either Observable<firebase.User> or Observable<null>). And that is true. null is not Observable<null> and it is definitely not Observable<firebase.User>.
Looking at the current angularfire docs it looks like AngularFireAuth is just a thin wrapper around firebase.auth.Auth that proxies calls and wraps them in Promises / Observables. Those documents also suggest that the correct way to use AngularFireAuth (currently) to get an Observable<firebase.User | null> is using the user property:
AngularFireAuth.userprovides you anObservable<User|null>to monitor your application’s authentication State.
So instead of this:
You need to do this:
user: Observable<firebase.User|null>;
constructor(private afAuth : AngularFireAuth) {
this.user = afAuth.user;
}