If this is your first trip to Bali, please consider waiting until you see the traffic conditions to decide about driving yourself. The traffic can be horrendous, and could not be more different to driving in Australia. We travel to Bali regularly and would never even consider driving ourselves. Believe me, it is not a relaxing proposition, road rules are "loose" and driving is very dangerous for the uninitiated. Just driving through the Denpasar area would be a character building experience. Out in the more rural areas, you will contend with trucks driving on the wrong side of the road, overtaking on the outside, being surrounded by motorbikes while trying to make a turn, etc etc. Not to mention the possibility of being pulled over by any Polisi who see a "bule" at the wheel and are looking for some extra pocket money.
If you have experience driving in Asia, you will understand what I mean. There are plenty of local options for hiring cars, and it is easy to organise while you are there if you are so inclined.
There are countless drivers offering their services, and you have the the bonus of a built in tour guide. You don't have to follow an itinerary, and we have had some fantastic drivers over the years. Have a great trip.
We always self drive (that is, hubby does - I wouldn't!) but only around the north and Ubud, not in the south, and we use drivers for transfers. From our experience, if you have the correct International Permit, and carry your Aust licence, you "should" be fine if pulled up by the Polisi. We've been stopped twice, documents checked and a polite "enjoy your holiday" is the result.
We've had one (very small) incident in 12 trips, last time a truck was on our side of the road and smashed the drivers side mirror. We got our hotel to call the rental agency (the hotel organises our car) and they said just leave $20 when we go and they'll fix it.
Please do take the comments above into account though - it's not at all for the faint hearted!
I used these guys and can recommend them. http://www.amerthadana.com/
A good deal and you can add a driver for a reasonable fee for days you want them. The car stay with you 24/7 which can be handy.
I strongly agree it makes no sense to self-drive in the busy areas of Bali. Heavy traffic, difficult parking, is not worth the little money a driver costs. One mile can take 1 hour+ - and if this happens you are better off walking and having the driver return home. Parking can be a pain and fa hike from where you want to go.
That said, the driving in Bali is not very difficult if you are used to driving in other Asian countries. I actually found it much easier than many places I have been to. When touring it can be nice to self drive depending on your travel personality.
We are here now, my husband drives, but has done for years, I agree with the comments above. Yesterday it took about 1hr to go one km, on Sunset Rd, due to road resurfacing, traffic was horrendous and could be intimidating for a new person to the Asian traffic. That said if you are driving away from tourist area and are careful it is fine. Correct license and insurance is a must. Cost of small car is about 160,000rp per day.
I used these guys and can recommend them. http://www.perdanarentalmobilsurabaya.com/
Haha, Sorry, take the $ sign away! 175,000 a day, $17.50. I've actually never done it before, I'm driving around the island with my 2 teenage kids. I've ridden scooters every time on all my 16 trips so I'm looking forward to driving. Once you are out of the Denpasar area all the advice I've been given points to a really enjoyable drive. I plan leaving Kuta early in the morning before the traffic gets too bad.