Melbourne's appeal is in its laneways, coffee and trams, so the smart budget move is to stay somewhere walkable rather than chasing the lowest nightly rate on the city's edge. The CBD itself has hostels and compact hotels aimed at exactly this crowd, and the free tram zone means a room just inside the grid comes with free transport for the day.
Southbank faces the river and is a short bridge-walk from the centre. St Kilda is beachside and cheaper again, with the tram running straight up to the city. North of the river, Carlton and Fitzroy suit travellers who want cafés and a neighbourhood feel over a big lobby.