Invited to bat first on a seaming pitch at the Melbourne Cricket Ground, under-siege England slumped to 182 all out as Australia set sail to retain the Ashes.
Already up 2-0 in the series, a win in the Boxing Day test would seal a series victory for Australia, one that is increasingly looking like a 5-0 whitewash.
England were rolled for less than 200 for the 12th time in tests this year, and at stumps, Australia were 61-1 as they set themselves up to dominate the third test.
Australia's pace-bowling captain Pat Cummins ripped through England's top order in the opening session, taking three wickets, and the hosts then claimed another three wickets in the middle session, removing the dangerous duo of Joe Root (50) and Ben Stokes (25).
The dismissal of Jos Buttler for three, after aiming a wild slog to deep mid-wicket off the bowling of spinner Nathan Lyon in the last over before tea, summed up England's struggles against Australia's disciplined bowling.