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Islands near Cairns

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On our trip to Australia in September (my husband, 8 year old daughter and myself),
should we spend our entire week in Port Douglas (at By the Sea Apartments) or should we consider staying on an island for 2-3 nights?

Is it worth the cost of staying on an island since we don't dive--or should we stay in Port Douglas and do day trips? Our budget max is $400 per night (including meals).

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