Chris Rogers, who had made 73 not out, and George Bailey, unbeaten on 20, will resume on Day three looking to further inflate the lead before Australia unleash their pace attack on the hapless tourists.
England's bowlers made inroads into the Australian batting order in the final session to contribute to the 13 wickets to fall at the Sydney Cricket Ground but the day was defined by a first hour that left the tourists reeling at 23-5.
While a dispirited England had once again contributed to their own batting downfall, Mitchell Johnson (3-33), Ryan Harris (3-36) and Peter Siddle (3-23) played decisive roles with another display of top quality pace bowling.
"It's obviously not a done thing yet, we've got to make sure we bat well in the morning and get some more and bowl like we did today to bowl them out again," Harris told reporters.
"We sort of figure they are going to fire at some stage, we hope they don't but... I don't think the wicket's getting any easier. If we bowl like we did today, I think we'll go alright."
Australia had made 326 in their first innings before reducing England to 8-1 overnight and drove home their advantage by ripping through England's top order in the early blitz.
It was Harris who started the carnage with the second ball of the day, when England captain Alastair Cook inexplicably padded up to an inswinger and was trapped leg before for seven.
Harris could have had a second wicket with his next delivery when Ian Bell edged the ball behind, only for Shane Watson to fluff a reasonably simple catch in the slips.
Nightwatchman James Anderson braved a couple of overs of short bowling before departing, also for seven, after finding the edge with a stab at a fuller length Johnson delivery, which Michael Clarke leapt to claim in the cordon.
Kevin Pietersen lasted just nine balls and 12 minutes before being dismissed for three courtesy of another edge to the slips from a Harris delivery, which Watson took this time after a juggle.
With England now 17-4 after just 32 minutes of play, Bell did his best to dig in.
He took 42 minutes to get off the mark but had just two runs on the board 14 minutes later when a superb delivery from Siddle had him caught behind by Brad Haddin.
"We knew we had to start well and pick up early wickets, we didn't think we'd get that many, I guess," Harris added.
Debutant Gary Ballance (18) went just after lunch before Jonny Bairstow (18) and Ben Stokes (47) offered some resistance in a partnership of 49 for the seventh wicket.
When they were dismissed in one Siddle over, though, England's hopes of any kind of respectable score went with them.
England saved the follow-on and looked like they might just scramble to tea but Johnson returned to the fray and clean bowled Boyd Rankin, the third of the England new caps, for 13 to end the innings and bring up the break.
Stuart Broad, welcomed to the crease by a chorus of boos, scored 30 not out in a late flourish but England needed him to shine with the ball if they had any hope of saving the Test.
Anderson made the first breakthrough for the tourists, though, trapping Dave Warner lbw on his back foot for 16 and having Watson caught behind for nine.
Australia captain Clarke was Broad's first victim, feathering an edge behind for six, before first innings centurion Steve Smith (7) got a thicker edge on a Stokes delivery which Cook claimed in the slips.
Opener Rogers kept piling on the runs at the other end, though, and reached his sixth Test half century in his 11th Test with a single before upping the run rate even further.
"I would say it is pretty disappointing today but 326 is way over par on this pitch in my opinion," England batting coach Graham Gooch said.
"So once that's score's on the board it's always going to be difficult and once we got the start we did and lost those early wickets... it's going to be tough from here on in from this position."