The simple answer is that a person should not be surprised to see a balloon almost anywhere although geographic and regulatory factors result in the favouring of certain locations.
The regulations provide for commercial licences and private certificates. There are certain restrictions on where private balloonists may operate such as around airports.
The two most likely areas aeroplane and helicopter pilots will encounter balloons are as follows:
Firstly, over or around the capital cities, particularly Canberra, Gold Coast, Melbourne and the Western suburbs of Sydney. Separation will be provided by Air Traffic Control if the balloons are operating in controlled airspace over the cities but particular attention should be paid by pilots operating outside controlled airspace.
Secondly, around smaller inland country towns within a few hundred kilometres of the capital cities. Towns with a reasonable surrounding road network will be favoured as this makes it easier for retrieve vehicles to collect the balloon and pilot from its inevitable outlanding. Coastal towns are less appealing because flying is restricted in the case of an offshore breeze. Coastal terrain is also generally less balloon friendly, with more hills and forests than inland areas.
Balloons will regularly operate up to 5000 feet but they should be expected up to 10,000 feet. They will rarely fly above this level because of the inconvenience of arranging oxygen and special approvals.
In fact, balloonists delight in low level flight and may spend entire flights brushing through the tops of trees.
Balloons are not allowed to fly in cloud but they may fly in fog. It is impossible to fly a balloon any way other than the right way up so complex instruments are not required even if visibility is very low.
Balloons may also operate at night VMC provided so they carry a red light suspended below the basket. This however, is an insignificant beacon compared to seeing the entire 30 metre tall balloon light up like a globe when the burners are activated.