Of the unis in Sydney, only UNSW requires a UAI prediction (as well as an elaborate application form - entry closing this Friday, by the way).
I hear that some schools give out inflated predictions to give their students a better chance at getting first-round interview. I'm rather glad my principal is keeping things within perspective for us.
Read aussiechica7's response - it covers pretty much everything you need to know on this matter. Don't worry too much if your prediction is less than the 95 cut-off to be considered for first-round - you can always work hard to do better in the HSC. Ultimately it's the actual UAI that is worth the weight.
Edit: Oh and remember that the predicted UAI is paired up with the actual UMAT score when they consider invitations to attend interview. A predicted UAI of 95 needs to be matched by a UMAT score of 250 and as one goes up the other goes down - for example if your predicted UAI is 100 then you only need a UMAT score of 170. The list is on the UNSW website.