This branch of the popular Mad Monkey chain has prime position on the Esplanade, with bars, restaurants and the lagoon a mere stagger away. That's assuming you make it out of the hostel itself, a tough call given it has its own bar, themed nightly events, free hot breakfasts and a gaming room. Dorms are sparkling if unexciting.
Free bike hire and airport pickups.
There are other Mad Monkey hostels in Cairns; see website for locations.