Following the 1993 landslide to the Liberals, ending 11 years of Labor government, Labor now led by Mike Rann held just 11 seats in the House of Assembly. The Liberals held 36 seats and there were no independent or minor party members in the House of Assembly. They had held a record 37, but lost one at the 1994 Torrens by-election. However the Liberals were suffering from heightened internal tensions, and John Olsen had successfully challenged Dean Brown for the Liberal leadership in 1996 and had been Premier of South Australia for around 12 months on election day. The 12-seat Liberal majority was seen as insurmountable for the Labor Party despite the Liberal leadership change.
To the surprise of most observers, Labor polled exceptionally well, gaining 10 seats and coming within a couple of seats of winning, forcing the Liberals to minority government. The Liberals lost a massive 14 seats; 11 to Labor (including one at a 1994 by-election), one to the Nationals, and two to conservative independents. Labor received a record two-party swing of 9.5 percent, as opposed to 9.1 percent to the Liberals at the last election.
The election was also notable for the Democrats' highest South Australian state election vote, falling short by two percent to one of the party's predecessors, the Liberal Movement (LM), who contested the 1975 state election. Though the Democrats did not win a lower house seat compared to the LM who won two, the Democrats finished second after preferences in seven seats compared to the LM in three seats.
In the Legislative Council, the Australian Democrats won two seats for the first time. Elected were 4 Liberal, 4 Labor, 2 Australian Democrats, and No Pokies candidate Nick Xenophon. Carrying over from the 1993 election were 6 Liberal, 4 Labor, 1 Democrat; leaving the numbers at: 10 Liberal, 8 Labor, 3 Democrats, 1 No Pokies.
The 1997 result put Labor within striking distance of winning government at the next election in 2002. John Olsen was left with internal disquiet over the leadership challenge and poor election result while his opponent, Mike Rann, was seen to have 'won' the campaign despite losing the election.
On 6 February 2007, Mike Rann told parliament that some in the Liberal party had leaked information to him before and during the election campaign. The following quote by Rann is from Hansard on 6/2/2007 :
"You asked me a question and I will give you a 55-minute answer, because you will remember one day when I came into this place and I had, I think, 880 pages of cabinet and other documents... I remember being telephoned and told to go to a certain cafe, not in a white car but in a taxi, and then to walk in a zigzag fashion through the streets of a suburb, where I was to be handed cabinet documents. So much for their cabinet solidarity and cabinet confidentiality! There was a queue on the telephone telling us what had happened the day before. It was the same during the 1997 election campaign. People thought, `How does this guy (the leader of the opposition at the time) know intuitively exactly what John Olsen is doing the next day?' It was because I was being phoned and told! So, do not talk to me about cabinet solidarity lest I come in here and start naming names, which will set off another generation of disputation on the other side of the house. Anyway, cabinet approved, among other things, on 20 December 2006 minister Lomax-Smith's proposed statement and approved her to announce publicly that she opposed the proposal in cabinet. She did so because we agreed that she should be able to do so. Somehow I do not think that John Olsen agreed to what happened when I was getting the phone call at 6 o'clock in the morning and at midnight, and walking in a zigzag pattern through suburbs to be handed a cabinet bag and cabinet documents. We have a different approach. We agreed to it. It was a cabinet decision to agree to it. So, please, ask me some more questions, because there were two different camps involved in this leaking to the then poor unpopular leader of the opposition, and I am more than happy to name names."