17 Carlisle Street, St Kilda, Melbourne

This hostel sets the standard for classy backpacker hostel accommodation in Australia. 

It's very hip and modern rooms and facilities look more like a boutique hotel.  It's got a wicked bar too. 

Located in trendy St kilda you're not right in the city, rather a short tram ride near the beach where Melbourne people socialise so you'll be staying right in the heart of the action.