The man, whose name was not reported, left a party near the campground in Kiama Saturday night and lost control of his vehicle before driving through a fence and running over the family's tent, The Daily Telegraph, Sydney, reported.
Authorities said the driver had a blood-alcohol reading of 0.174.
Seven-year-old Emily Wilson and her brother, Oscar, 4, were dragged for several feet and had to be pulled out from underneath the car, the Australian Broadcasting Corp. reported.
Emily suffered a collapsed lung and a broken ankle and Oscar had bruising and burns.
Their father, Bruce, was treated for a fractured pelvis and their mother, Gill, has a collapsed lung as well as spinal and rib injuries, officials said. None of the injuries are life-threatening.
The suspect was charged with two counts of aggravated dangerous driving causing grievous bodily harm and two counts of causing bodily harm by misconduct while driving. His license was confiscated.