One of my biggest questions when I was first headed to Australia for my year abroad (that turned into four years abroad) was what city to start in. I'm going to tell you off the bat that I am 100% biased because I love Melbourne ridiculously. It is my all-time favorite city. However, in a confusing twist, I think it may be better to start your trip in Sydney.
Melbourne
I chose Sydney to start in because there was an intro program there (Ultimate Oz) that introduced me to other travelers and planned my first week for me. It just took some of the pressure off. I do think that you'll meet more travelers just beginning their travels in Sydney who may be in the same boat. However, do not get stuck! I met so many people in my first weeks there who never ended up leaving Sydney. They spent their entire first year working there, sometimes their second... in fact, I can think of at least a couple people I met there who still haven't left.
Sydney Opera House
If you do fall in love with a city that much, I still recommend doing your traveling. You went to Australia to see this gigantic country. Don't limit yourself to one corner! I adored Melbourne, but I pulled myself away after four months to travel onwards.
I do think it will be fun, however, to give you a comparison of these two cities so you can make your own decision. I promise I'll be fair! For the sake of simplicity, I'm leaving Brisbane out of this, although I'd like to say that I personally thought Brisbane was fantastic. Unfortunately I only spent three days there, so I can't compare it to these two where I spent so much more time, but check it out. It's a smaller, warmer, and far more underrated choice, but you can read about it here if you're interested.
Onto the main two!
Vibe: Melbourne
Melbourne has so much energy and culture. It's the artsy, hipster city of Oz. I was fortunate enough to live and work directly in the CBD and literally not a day went by when I was walking across the city that I wasn't in awe of how lucky I was to be there. Sydney always gave me a cold, corporate feel outside of the beaches.
Beers on the banks of the Yarra River
Beaches: Sydney
Not even a debate. Sydney has so many great beaches to choose from it's silly. Of course, Bondi is the famous one, but if you take the Coogee-Bondi coastal walk, you'll see some beautiful, underrated beaches along the way. Tamarama was my personal favorite.
Tamarama Beach
Bondi Beach
Activities: Tie
Sydney has boat rides through the harbor (jumping off a boat right in front of the famous skyline was a major highlight), Taronga Zoo, an aquarium, very nice botanic gardens, day trips to the Blue Mountains, massive shopping malls, parks, and the aforementioned beaches.
Sydney Harbor Cruise
Blue Mountains
Melbourne also has very nice botanic gardens, a zoo, an aquarium, the old jail, trendy suburbs, day/overnight trips down the Great Ocean Road, to the Grampians, or to Phillip Island, the casino, rooftop bars, free art museums, and so much to just wander around and see. Both cities have their own Luna Park, a small amusement park. Too tough to call.
Melbourne Botanic Gardens
Twelve Apostles on the Great Ocean Road
CBD: Melbourne
I can't rave enough about Melbourne's city center. Some may love Circular Quay and Sydney Harbour, but I personally will take Federation Square any day. The architecture in Melbourne is unbelievable. You've got this awesome, eclectic mix of super sleek, modern buildings right next to old churches.
Federation Square
Just across from Federation Square is Southbank with its bars, restaurants, and river. Also, Melbourne is far more compact and walkable. Just take a look at a map of each city and compare Melbourne's sensible, grid-like structure with Sydney's chaos. Oh, and the transport is far superior.
Nightlife: Sydney... but...
Keep in mind that I visited Sydney before their new, very controversial lock-out laws (basically, the bars are closing earlier and instate a one-way policy at a certain time), but I personally preferred my nights out there to Melbourne. The CBD has some great, somewhat affordable backpacker bars (Side Bar next to the Wake Up hostel was my hangout), Darling Harbour is full of bars and restaurants on the water, and King's Cross is known for nightlife and debauchery.
Melbourne is great and probably safer, but it's an entirely different atmosphere. I found the bouncers to be stricter (once wasn't let into a bar because we didn't have enough females in our group), the dress codes to be more pretentious, and the prices to be higher. St. Kilda is the best bet for a decent night that won't drain your bank account, but the CBD and Chapel Street are higher-end. I do love Melbourne's rooftop bars, and I suppose if I had money while there it might have won this round, but as a broke backpacker, Sydney treated me better.
Darling Harbour
Backpacker hub: Melbourne/St. Kilda
Rough and debatable call, but I had the greatest time living in St. Kilda (the beach suburb of Melbourne) and met some of my best travel buddies there. Home Travellers Motel was one of my all-time favorite hostels! You might meet MORE people in Sydney, but the community in St. Kilda is smaller and it's easier to connect.
On the flip side, I did have one of my best weeks ever staying at Surfside Backpackers off Bondi Beach, which brings me to...
Special Occasions: Sydney
Sydney is the place to be for New Year's Eve. I made one of my worst travel decisions ever by skipping the fireworks (let's not talk about it), but I had the most fun Christmas of my life at Sunburnt Festival on Bondi dancing in the rain.
Sunburnt Festival
Shore Thing New Year's Eve
Weather: Sydney
Melbourne doesn't stand a chance here being that it's on the south coast of the country. It's rainier and chillier. While Sydney still doesn't have the tropical heat of Queensland, it tends to follow a kinder weather pattern. Melbourne's summers can get hot as well, but Sydney is far less temperamental.
Watsons Bay
Art & Music: Melbourne
Both cities have their fair share of concerts, but you can find an indie band in Melbourne any night of the week (especially in Fitzroy, St. Kilda, or Brunswick). Along with the music, Melbourne has its unique architecture, free art museums, and street art on top of that. Hosier Lane constantly has new graffiti on display.
Bonus: Melbourne is super veggie friendly, not something you'll find in the more rural parts of Australia. Between the Lord of the Fries all-vegetarian fast food chain (finally a deep-fried, deliciously unhealthy, meat-free option!), the actual no-catch free "donate what you think your meal was worth" Lentil As Anything, and the wide array of Asian dining options, Melbourne was kind to my people.
Verdict: Up to you. Melbourne is my city, and its perks appealed to me more than those of Sydney, but there's a good chance you may have to visit both cities yourself to decide. I spent a month in Sydney without developing much attachment to it but knew within my first two hours in Melbourne that it was where I needed to be.
For a more in-depth look at my time in each city, read about my first weeks in Sydney and Christmas on Bondi or my four months in Melbourne and St. Kilda. See it all is what I say! Best of luck on your travels!
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