Nigel Mansell was absent, still recovering from an accident at the penultimate round in Japan. Riccardo Patrese, who had already signed to partner Mansell at Williams for the 1988 season, received permission from Brabham owner Bernie Ecclestone to substitute for Mansell at Adelaide. Patrese's place at Brabham was taken by Stefano Modena, the reigning Formula 3000 champion, making his Formula One debut.
Despite being ill during the qualifying session, Berger secured pole position by 0.7 seconds from Alain Prost in the McLaren. Nelson Piquet, in his final race for Williams, qualified third, with Ayrton Senna fourth in his last race for Lotus. Thierry Boutsen in the Benetton and Michele Alboreto in the second Ferrari followed in fifth and sixth. Patrese was seventh in the second Williams, with Stefan Johansson in the second McLaren, Teo Fabi in the second Benetton, and Andrea de Cesaris in the Brabham completing the top ten. Modena qualified 15th, just behind Satoru Nakajima in the second Lotus.
At the start, Piquet darted past Berger to take the lead into the first chicane. Alessandro Nannini's Minardi crashed into the wall on the exit of that corner and was eliminated immediately. Berger, buoyed by his victory in Japan the race before, re-passed Piquet at Wakefield Corner and began to build a margin over the rest of the field.
Early retirements included Philippe Streiff, who spun off in his Tyrrell on lap 7, and Nakajima, who suffered a hydraulics failure on lap 23. Modena's debut ended on lap 32 when he stopped in the pits due to exhaustion.
The contest for second place among Piquet, Prost, Alboreto, and Senna remained unsettled until lap 35, when Piquet pitted for tyres and dropped to sixth. On lap 42, Prost was obstructed by former teammate René Arnoux's Ligier on the pit straight, allowing Alboreto to slip through before Senna overpowered both the McLaren and the Ferrari to move into second.
Brake failures became the defining theme of the second half of the race. Fabi was the first victim on lap 47, followed by Johansson on lap 49 and Prost on lap 54. Piquet's brakes also gave out on lap 59, leaving Berger, Senna, and Alboreto as the top three, with Boutsen and Patrese behind them.
In the closing stages Senna closed to within eight seconds of Berger, but the Austrian reasserted himself and set the fastest lap of the race on lap 72 before crossing the finish line just under 35 seconds ahead of Senna. Alboreto was the only other driver on the lead lap. Boutsen, Jonathan Palmer in the second Tyrrell, and Yannick Dalmas in the Larrousse completed the top six after Patrese suffered a late oil leak.
In post-race scrutineering, officials found that the brake ducts on Senna's Lotus were oversized, and he was disqualified. Alboreto was promoted to second, giving Ferrari a 1-2 finish, with Boutsen elevated to third, Palmer to fourth, Dalmas to fifth, and Roberto Moreno to sixth — the last result scoring the first World Championship point in the history of the AGS team. Christian Danner in the Zakspeed, de Cesaris, and Patrese were the only other classified finishers. Dalmas did not receive points towards the Drivers' Championship for his fifth place, as he was driving Larrousse's second car and the team had officially entered only one car for the championship, that car having been driven throughout the season by Philippe Alliot.
The win proved historically significant beyond the race result: it was the last victory for Ferrari during the lifetime of team founder Enzo Ferrari, who died in August of the following year. The race also saw the unusual circumstance of all four drivers grouped as the era's dominant quartet failing to score points at the same Grand Prix, for a variety of unrelated reasons.
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