The incumbent Labor Party, which had been in power continuously since 1934, was led by Eric Reece, who had been premier of Tasmania since 1958.

The election resulted in a hung parliament, with the Labor and Liberal parties on 17 seats each (out of 35).

Lyons approached Bethune with an offer for a coalition government with himself as Deputy Premier.

Bethune agreed, allowing him to form government by one seat—thus consigning Labor to opposition for the first time in 35 years.

The resulting instability triggered an election, which was easily won by Eric Reece and the Labor Party.