For those heading to Sydney, check out the YHA Sydney Harbour backpacker. I give it 5 stars for a backpacker. It's 1/3 the cost of a hotel and is less than a year old. This entire entry is just about the YHA, btw. They are all over NZ and Aus, and I'll be staying at them whenever I can.
The place I stayed for the remainder of my time in Sydney was fantastic. It cost $42 a night, which is very high for a backpacker but obviously nothing near a hotel price. But it might as well have been a hotel with roomates. The hostel was located in The Rocks, which is right below the Sydney Bridge, next to Circular Quay (pronounced Key... wtf English?!) and across from the Opera House. The first floor of the backpacker was actually an archaeological dig site, with half excavated ruins of the first settlers of Sydney. The rest was on stilts above this area, which was still visible through the building in the large central atrium. The rooms had four clean, new beds, a private shower, and large lockers for personal stuff. There were plenty of energy saving features too, like a gray water system, and shutters which helped keep the rooms cool while still letting some light in.
On the fourth floor was a balcony which had the bridge to the left, followed by the Quay and the Opera House, and then all the sky scrapers to the right. On the third night, they had a barbeque (aka tailgate or grill cookout, not REAL bbq...) where they grilled up some kangaroo for burgers. It was surprisingly delicious. My roomates included a German guy named Alex, who had come down to Melbourne for the Australian Open a couple weeks earlier and was wrapping up his aussie trip. There was also a guy from Korea, another from Toronto who looked Thai, and on other nights a Portuguese salsa dance instructor who worked on a Canadian luxury cruise ship. The final night our roomate was a elderly Irish gentleman who had a delightful accent, but sadly didn't have time to chat with me since it was late, and I had to get up at freakin 5am to catch my poorly chosen 8:30 am flight.
Other features of note included a laundromat, a huge restaurant sized kitchen with free to use fridges and freezers, and common area with a computer lab, a TV lounge, and a 24hour staffed information / check out desk with plenty of planned activities.