We have friends coming over at Christmas who are looking to travel from Mackay and drop a car off in Sydney. Does anyone know of a good but cheap rental company which would allow them to do this.

Of the non - Hertz/Europcar etc lot, RedSpot seem to be in Mackay and Sydney

You could try standbycars.com, then click on the link "standbyrelocs.com. You can often hire a car for $1 a day! Rental companies often need to relocate cars from one city to another, in different states, and this is how they do it. Maybe worth a look if money is tight.

yes you can also hire campers this way they give you a time limit to do the journey some even give you petrol money

Last year I picked up car from airport in mackay and dropped it off in cairns airport 2 weeks later. it was with Europa rental but I booked it from UK with Rhinocar hire. Sure you can probably drop off in Sydney as well, long drive though.