The hosts came from behind to win by six wickets, going 2-0 up in the best-of-five series with three to play, leaving England with a mountain to climb in their battle to retain the Ashes.
Several former England skippers questioned head coach Duncan Fletcher's team selections, asking why Monty Panesar, who Fletcher hailed as the best finger spinner in the world earlier this year, was sitting on the sidelines after being left out of the first two Ashes Tests.
A downcast Geoffrey Boycott, commentating for BBC Radio, feared the upbeat Aussies could "bury" England.
"I personally don't think they can pick themselves up," said the no-nonsense former opener, who also called on England skipper Andrew Flintoff and wicket-keeper Geraint Jones - picked for his batting - to up their run-scoring.
"Australia are cock-a-hoop, they are in good form and are confident. There's a danger they will bury England.
"The batsmen are making too many mistakes. You can't keep depending on Paul Collingwood, Kevin Pietersen and Ian Bell. Andrew Flintoff and Geraint Jones are not making enough runs.
"And I don't see how England are going to get 20 wickets," the Yorkshire legend added.
"I think the England squad is a pretty decent set of lads, but stop talking a good game and start performing a good game.
"It is as simple as that. Don't tell us you will come back, just do it. But at the moment I don't think they are capable of it."
Alec Stewart, who captained England in Australia in 1997-98, also said England's bowling attack was under-performing.
"Flintoff and (Matthew) Hoggard have caused Australia problems but Steve Harmison has taken one wicket in two Tests while both (Ashley) Giles and (James) Anderson have struggled.
"And we are not looking like taking 20 wickets. That is my biggest issue. Harmison has improved slightly but he has only taken one wicket in the series.
"This will be England's biggest task ever. We have Collingwood, Pietersen and Ian Bell scoring runs but no-one else," grumbled the Surrey hero.
Fellow former England skipper Nasser Hussain said Fletcher's men now faced the "biggest test" of his reign.
"He will come under the immense pressure in the next week or so," Hussain said, according to London's Evening Standard newspaper.
"His selections have let him down and let England down in Giles and Jones. There have been no runs and no wickets and Giles dropped a crucial catch (when Australia captain Ricky Ponting was on 35 before making a first innings 142).
"The coach has got to get his thinking cap on and work out how to get 20 wickets. It will be a difficult time for Fletcher and a difficult time for England."
Former all-rounder Ian Botham insisted Fletcher had to wield the axe ahead of the third Test in Perth, and wondered whether Panesar would finally be deployed.
"I am asking questions. A lot of people are asking questions. Is Monty Panesar here or has he gone home?" a perplexed Botham said.
"I am totally confused. I was confused at the start of the series and I am even more confused now.
"I am not taking anything away from Australia, they have been magnificent, but we have two players who have hardly played any cricket in a year -- Jimmy Anderson and Ashley Giles, two key bowlers."
David Gower added: "England will find it very hard to believe there is a way back now. Having been 551 for six declared, a man scoring a double century (Collingwood), another man scoring 158 (Pietersen), a man taking seven wickets (Hoggard) -- how they ended up on the losing side is anyone's guess."
Michael Atherton said current captain Flintoff would have learnt a harsh lesson from the defeat.
"For large parts of this game England haven't played badly. It's a great lesson. You can play as well as you like but one bad session can lose you a Test match," he said.