Responding to Australia's 371, England faltered to 213 for eight in near-perfect batting conditions.
Captain Ben Stokes remained unbeaten on 45 from 151 deliveries, battling discomfort, but his defensive effort could not prevent the collapse.
Australia's bowling attack, led by captain Pat Cummins and spinner Nathan Lyon, who surpassed Glenn McGrath's Test wicket tally, proved highly effective.
The poor performance leaves England facing another defeat, having already lost the first two Tests of the series.