The Australian Grand Prix had been the Formula One season opener every year since 1996, but the 2006 Commonwealth Games in Melbourne forced a schedule change and the season opened instead in Bahrain. Australia returned to its customary first-round slot for 2007. A pre-season test originally scheduled at the Circuit de Barcelona-Catalunya was also rescheduled to the Bahrain International Circuit. Legendary commentator Murray Walker made a one-off return to the broadcast box for Australia's Network Ten.
The start was chaotic before a single racing lap was completed. Juan Pablo Montoya spun at the end of the formation lap and lined up at the rear of the grid. Giancarlo Fisichella then stalled on the grid, forcing the entire start to be aborted. Fisichella had to begin from the pit lane while Montoya reclaimed his original grid position.
On the opening lap, Felipe Massa attempted to squeeze between Nico Rosberg's Williams and Christian Klien's Red Bull and was pitched hard into the wall, retiring on the spot. Rosberg lost his rear wing in the contact but continued. A safety car was deployed. Fisichella spun at Jones corner but continued. When racing resumed, Alonso passed polesitter Jenson Button on the start/finish straight.
On lap three, Klien crashed heavily near Clark Chicane after a suspension failure, bringing out a second safety car. When racing resumed, Räikkönen attacked and passed Button. After the first round of pit stops, Mark Webber led his home Grand Prix when Alonso and Räikkönen pitted. Webber became the first Australian driver to lead his home Grand Prix since John Bowe led the early laps of the non-championship 1984 race.
Michael Schumacher ran wide at the Prost turn on lap 32 and struck the barriers, prompting a third safety car. Many drivers pitted under the caution. A fourth safety car deployment followed on lap 36 when Vitantonio Liuzzi crashed heavily near Whiteford — Liuzzi blamed Jacques Villeneuve for the incident. At each restart, Alonso deliberately left a large gap to the safety car before accelerating hard to create separation from Räikkönen.
On the final lap, two corners from the chequered flag, Jenson Button's engine blew and covered Fisichella's car immediately behind in oil. Button deliberately pulled off the circuit approximately ten metres from the finish line rather than crossing it, forfeiting a points-scoring fifth place to avoid a ten-place grid penalty in the following race for using an additional engine.
Alonso claimed his tenth career victory. Räikkönen took second and Ralf Schumacher scored what proved to be the final podium of his career — and the sole podium Toyota would achieve all season — despite serving a drive-through penalty for speeding in the pit lane.
Post-race the stewards issued a reprimand to Takuma Sato for ignoring blue flags and a 25-second time penalty to Scott Speed for overtaking David Coulthard under yellow flags; Speed was also fined $5,000 for using abusive language during a post-race hearing. The result gave Renault three victories from three races to start the season. It was the last race until the 2015 Mexican Grand Prix in which neither Ferrari car was classified.
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