John Howard announced his resignation on election night after the coalition's defeat in the 2007 federal election, including the loss of his own seat of Bennelong. He had led the party since 1995 and been Prime Minister since the 1996 election.
The deputy leader and outgoing treasurerPeter Costello had for a long time been publicly heralded as the natural successor to John Howard, and was confirmed as such by Howard on 12 September. However, on 25 November, Costello announced he would not be a candidate for either leader or deputy leader of the party in opposition, saying that it was time for the party to move to the next generation, and that he himself intended to leave Parliament during the current term.
Peter Costello announced on 27 November that the leadership and deputy leadership would be decided at a meeting held at midday on 29 November. All Liberal MPs and Senators were invited to attend, including those whose seats had yet to be decided, with the federal director deciding who would be eligible to vote based on the most up-to-date election results. Due to this, questions within the party were raised over the rules and legitimacy of the ballot. The loss of John Howard in Bennelong meant that the election of a new leader had to be held much closer to the election than would normally occur.
Malcolm Turnbull was the first candidate to announce his intention to lead the party and was said to have the largest support from Liberal MPs going into the ballot.
Turnbull and Abbott proposed that the party should drop its support for the WorkChoices legislation following their defeat in the federal election. However Nelson said he would not support undoing WorkChoices.
Brendan Nelson won the ballot for leader against Malcolm Turnbull, by 45 votes to 42. Julie Bishop was elected deputy leader with 44 votes, against 25 for Andrew Robb and 18 for Christopher Pyne.