"Rank number one has the special privelige of being exempt from the moderation process (the process by which your class might 'drag' you up or down). Your rank number 1 is potentialy as valuable as the rank number one of a selective school or anything. Rank number one means that your classes highest exam mark will become your internal assesment mark. So say you get the highest HSC exam mark in your class with 93 or something then 93 will be your internal assesment mark (and thus your entire HSC mark because your exam mark is also 93). If someone else in the class gets the highest exam mark, then that exam mark will become your internal assesment. In this scenario if you got 80 in the exam and your classmate got 90, then you would get 90 as your internal assesment mark and 80 as your exam mark, meaning a final HSC mark of 85. So to answer your question, no. When you are number one, your class can be as shit as you like but this won't drag you down."
In the case of two people coming equal first...
"If two people are coming 1st then the two highest exam marks will be averaged and the two top students will recieve that for their internal assesment marks. For example, say the two number ones receive 94 and 88 for their exams. For their internal assesment mark, these two exam marks (assuming they are the highest exam marks in the class) are averaged ((94+88) divided by 2= 91). So they both receive 91 for their internal assesment marks and once these are averaged with their respective exam marks, so for their final HSC marks they will each recieve 92.5 (93) and 89.5 (90). I hope this is clear enough, and if their are any errors in what I've said, then by all means, somebody correct me! But, to answer your question- yes. essentially the same applies dor equal firsts, though the conditions I've described are imposed."
Hope this has helped. The process that happens to ranks other than first (and last) is more complex. Casmira's post is incorrect I think. Though I'm not much of a maths kid, so I can't explain it.