Hi,
There are heaps of options in both cities. As I live in Sydney, I can only give you advice on Sydneys' hostels.
As far as I know, there heaps of hostels in Kings Cross, some look find some not, but I did not visit them.
In Manly there are:
- The Manly Bunkhouse, Pine Street, It is clean, cheap and the staff is friendly. It is really close to the beach.
- 222 Glebe Guest House, Glebe Point Road, Glebe. It is clean, cheap and facilities are great.... Rooms are high quality...
http://www.222glebe.com
It is not much, but I hope it could help you...
Cheers
Alban