Openers Andrew Strauss (56) and Ian Bell (43) laid the foundations well before the middle-order collapsed inexplicably and handed the Aussies advantage in the eagerly anticipated match.
Shane Watson and Mitchell Johnson scalped three wickets apiece to derail the England innings.
Wary of the dew factor, the Australians took to the field after winning the toss. For once the decsion seemed like going horribly wrong after the openers gave England a sound start and added 83 for the first wicket in 19 overs.
Keen to prove a point after a disastrous bating display against India here on Sunday, England started cautiously with both Andrew Strauss and Ian Bell circumspect in the initial overs. Both the openers got into the groove soon and Bell flicked Nathan bracken through mid-wicket in the fourth over to bring the first boundary of the innings.
With the odd ball keeping low, Strauss played a patient knock and waited till the sixth over before resorting to some willow wielding.
Ponting introduced his trump card Glenn Mcgrath in the sixth over but Strauss subjected the veteran bowler to an unceremonious thrashing by hitting him for consecutive boundaries.
Both the Englishmen appeared to have taken exception to McGrath's remark that the Aussies would whitewash the Poms in Ashes next month as they plundered 27 runs off a four-over spell by the paceman.
Damien Martyn did not help his teammates either and dropped Ian bell at mid off when the batsman was at 23. England completed their 50 in the 11th over. With the batsmen scoring freely off one and all, Ponting introduced Shane Watson in the 19th over and the move paid off instantly when Bell, looking all set for a good score, tried to slash the bowler over the point only to caught by Michael Hussey. Bell fell after scoring 43 off 60 balls with seven fours.
The wicket triggered the collapse and it seemed that Englshmen had a flight to catch. Next man in Kevin Pietersen (1) survived only six balls before edging Johnson to wicketkeeper Adam Gilchrist.
Skipper Andrew Flintoff tried to hang in there with Strauss as England completed their 100 runs in 24th over. Ponting summoned Watson and the bowler did the trick again by sending the English skipper back in the hut.
Hit on the face by a short ball from Watson, Flintoff tried to pull him over the mid wicket boundary two balls later only to be caught by Hussey in the deep. England were left reeling at 110 for three in the 26th over.
Holding one end together, Strauss showed application and looked in complete control. He smashed Brett Lee to point for a four and followed it up with a single in the 25th over to complete his half-century in 78 balls.
However, England recieved a body blow when the southpaw also gave in trying to cut Andrew Symonds but only managing to nick to Gilchrist. Strauss made 56 in 90 balls with six boundaries.
Promoted ahead of Paul Collingwood, Michael Yardy never looked comfortable and nicked Watson off his pads to the wicketkeeper for an individual score of four. Half of England's team was back in the pavilion by the 32nd over with just 125 on board.
Jamie Dalrymple (3) couldn't last long and was undone by Ricky Ponting, who caught the batsman brilliantly at short mid-wicket off Mitchell Jhonson. At 135 for six in the 36th over, England had clearly lost the plot.
Mcgrath claimed wicketkeeper Chris Read (0) while Sajid Mahmood (8) smashed back to Nathan Bracken. After Johnson undid Stephen Harmisnon (1) with a short pitch stuff, the Englishmen tottered to 151 for nine in the 41st over. James Anderson (15) played some shots but that was just a flash in the pan and Mcgrath bowled him to fold up the English innings for 169. Collingwood (22) remained unbeaten.
For Australia, Watson was the wercker-in-chief and returned with the figures of three for 16 in his seven overs. Left-arm seamer Mitchell Johnson took three for 40 in 10 overs while McGrath came back strongly in the second spell to end up with two for 36.