Heading into the final round of the 1995 Formula One season, both the Drivers' Championship and Constructors' Championship had already been decided. Michael Schumacher had claimed the Drivers' Championship two rounds earlier at the Pacific Grand Prix, and Benetton secured the Constructors' Championship at the preceding Japanese Grand Prix. This race marked Schumacher's final event with Benetton before his move to Ferrari for the 1996 season. It was also announced that this would be the last Formula One event held at the Adelaide Street Circuit, with the Australian Grand Prix relocating to Melbourne from the 1996 season.
During the Friday afternoon qualifying session, Mika Häkkinen, driving for McLaren, suffered a puncture in his left rear tyre while approaching Brewery Bend. This led to him losing control, becoming airborne, and crashing heavily into a tyre barrier at 120 mph. The impact caused his helmet to strike the steering wheel, resulting in a fractured skull. Doctors stationed at the corner attended to Häkkinen within seconds, finding him unresponsive with a blocked airway. They performed an emergency tracheotomy before transporting him to the Royal Adelaide Hospital. Häkkinen recovered in time to compete in the following season.
The Williams cars dominated qualifying, with Damon Hill securing pole position and David Coulthard alongside him on the front row. Schumacher qualified third for Benetton, followed by the Ferrari drivers Gerhard Berger and Jean Alesi in fourth and fifth, respectively. Heinz-Harald Frentzen completed the top six in his Sauber.
The race commenced at 14:00 ACDT. Damon Hill initially lost the lead to David Coulthard at the start, and Michael Schumacher also lost ground, with Berger moving into third and Alesi into fourth. Schumacher regained third place by overtaking Alesi on lap one, and then Berger a few laps later. Coulthard maintained his lead until the first round of pitstops. However, he entered the pitlane too quickly, locked his front tyres, and collided with the pitwall, forcing his retirement. Shortly after, Roberto Moreno of Forti spun and sustained terminal suspension damage at the same location where Coulthard had crashed.
Following the first round of pitstops, Schumacher and Alesi collided, leading to both drivers retiring from the race. Johnny Herbert, Schumacher's Benetton teammate, briefly held second place before pitting later than most others. Berger was promoted to second but retired with an engine problem, elevating Frentzen to second before he too retired with a gearbox issue.
With many front-runners out, Hill led the race despite a 22-second botched pit stop, with Herbert running second and Eddie Irvine third for Jordan. Irvine then retired after losing all pneumatic pressure. Herbert remained second and looked set to claim third in the Drivers' Championship, but was ultimately forced out when his Benetton suffered a driveshaft failure. Olivier Panis in his Ligier moved into second place, a lap behind Hill, while Footwork driver Gianni Morbidelli was third, two laps down. Panis' Ligier began suffering an oil leak in the final laps, and Hill lapped him for a second time en route to victory. Panis held on to second, and Morbidelli secured his only career podium finish, which was also the first podium for the Footwork/Arrows team in six years. Mark Blundell finished fourth for McLaren, with Mika Salo fifth for Tyrrell. Pedro Lamy recovered from a mid-race spin to take sixth in his Minardi, earning his only Formula One point and Minardi's last until the 1999 European Grand Prix. Only eight cars finished the race, with Pedro Diniz's seventh place being Forti's best Formula One finish. Pacific's eighth place equaled their best result since the 1995 German Grand Prix.
The 1995 Australian Grand Prix marked the end of Pacific Racing's Formula One involvement, as the team returned to International Formula 3000 for 1996. It was also the last race for Mark Blundell, Bertrand Gachot, Roberto Moreno, Taki Inoue, and Karl Wendlinger. The race was the last to use the traffic light system with colored lights at the start, a system in place since the 1975 British Grand Prix. Additionally, it was the final race for a V12 engine in Formula One, as Ferrari, the sole user of this configuration, switched to a V10 engine for 1996.
The Grand Prix recorded an attendance of 520,000 over the weekend, with 210,000 on race day, setting a Formula One record that stood until the 2000 United States Grand Prix. This race was the last until the 1997 Australian Grand Prix that 24 cars were entered into a Grand Prix weekend, though only 22 started due to Luca Badoer's mechanical problems and Mika Häkkinen's withdrawal following his qualifying crash.
Damon Hill, who had faced criticism for his performances in the three preceding races, was praised by commentator Murray Walker for his dominant victory. Walker suggested that with Schumacher moving to Ferrari and Coulthard to McLaren, Hill would be a strong favourite for the 1996 title if he could maintain this level of performance.
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