Also depends on your financial constraints.Look at areas around the CBD/Central/Darling Harbour and then look at tariffs.Plenty of hotels and hostels around the southern side of the city near Central.
You can stay in the CBD or around the rocks. If you don't mind a short bus ride across the Harbour Bridge each day, you could try North Sydney as well.
Thanks for the replies! I ended booking a hotel right outside Hyde Park!
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