The Australian, who won the tournament in 2002 and 2004, stormed to the lead with a faultless second round which included seven birdies and was at 11-under 133.
Lonard's run up the leaderboard included four straight birdies on the back nine, as he took the lead ahead of countrymen Nathan Green, Wade Ormsby, Paul Gow and Rod Pampling -- all at 10-under.
'I was struggling a bit early,' Lonard said. 'It wasn't the same contact as I had yesterday but toward the end I started to feel comfortable over the ball again.
'That chip-in (on 11) helped and I made a good putt on the next. After that they kept going in thankfully.'
Green, who tied for third at last year's tournament, had nine birdies in an 8-under 64, the best round of the day. The winner of last week's New Zealand Open said his stroke play remained strong.
'I didn't feel overly confident because I didn't play great yesterday,' Green said. 'But I came out today and made one over the back edge of the 11th and from then on just putted really well.'
Gow also had a 65 one day after opening with a 69. Ormsby, who tied for second behind Green at the New Zealand Open, carded 66 with five straight birdies between the second and sixth holes.
Australia's Peter O'Malley (69), the early second-round leader, finished the day tied for sixth place with Nick O'Hern (69) at 9 under.
Adam Scott, ranked No. 4 in the world, had a 67 and was in tied for 21st place at 5 under.
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