UNSW, best engineering school in Australia
only real competitor is U Melbourne
I have no clue where people get this idea, though it seems to mainly come from outside Victoria.
The point may be moot now that the Melbourne Model has seen the aforementioned end of the BE -well, almost- and tenure of the academics, but Chemical is the only Melbourne engineering course that I've heard anything positive about.
Monash is considered the best engineering faculty in Victoria for everything else except civil (in which case you're better off at RMIT than either UMelb or Monash).