Chronic wounds pose a global public health challenge, particularly in remote settings where access to specialised wound care and dressings can be limited and cost-prohibitive. First Nations communities in Australia are at a significantly higher risk for developing chronic wounds and this risk further increases for people living in remote regions. There is an urgent need to develop inexpensive but effective wound dressings to improve wound outcomes. Over the past decade, sodium alginate (SA)-based hydrogel polymers have emerged as a cost-effective and biocompatible component in wound dressings, and many have been successfully commercialised. In this study, we have developed and evaluated various prototypes of SA-based hydrogels with the addition of another low-cost component, aloe vera (AV) to further tailor the physicochemical properties of the hydrogel. Since the presence of microbes is a major contributor to the pathophysiology of chronic wounds, we also evaluated the antimicrobial activity of lemon myrtle oil (LMO) (Backhousia citriodora) incorporated into the hydrogel, a remedy used traditionally by First Nations Australians. Novel formulations of AV-SA-LMO hydrogel prototypes in the absence and presence of lemon myrtle oil (at a concentration of 5 μg/mL) were assessed for their physicochemical and antimicrobial properties and compared to a commercially available hydrogel-based dressing. The addition of lemon myrtle oil imparted viscoelastic behaviour for improved processability of AV-SA-LMO hydrogel prototypes, while increasing protein adhesion, enhancing physical properties, and demonstrating antimicrobial activity against the common wound-infecting microbes Staphylococcus epidermidis and Candida albicans. Fourier transmission infrared (FTIR) spectra confirmed the molecular structures of the hydrogel prototypes as predicted. The prototypes also demonstrated biocompatibility with the HaCaT human keratinocyte cell line. This study has provided preliminary evidence that a 25:75 aloe vera:sodium alginate hydrogel with 5 μg/mL lemon myrtle oil has comparable physicochemical characteristics to a commercial hydrogel-based wound dressing and antimicrobial properties against S. epidermidis and C. albicans.