Both balloons were departing from the same area and commenced inflating their envelopes at about the same time. VH-HJA, the smaller balloon, was ready for launch first and after takeoff initially drifted in a south-westerly direction before reversing direction and drifting back towards the takeoff point, at about 200 feet above ground level. At about this time VH-AJB was ready for launch, and after takeoff it began to drift to the south-west toward the approaching VH-HJA. The pilot of VH-AJB signalled to the other pilot to climb. Despite the pilot of the smaller balloon operating the burners, the envelope of VH-AJB collided with the basket of VH-HJA. The basket was tilted to an acute angle but all the occupants managed to maintain hold and remained in the basket. The envelope of VH-AJB became snagged on the basket but was released by a passenger in VH-HJA. Both balloons then separated and continued their respective flights without further incident. In general, the procedures governing ballooning require that the higher balloon give way to the lower balloon. However, it is also a requirement that aircraft (including balloons) on the ground give way to those that are airborne. In this case, it would have been prudent for the pilot of VH-AJB to have delayed his takeoff until the other balloon was well clear. Equally, the pilot of VH-HJA should have climbed his balloon when he saw that it was drifting back towards the departure point where the other balloon was preparing for takeoff.