The 30-year-old from Melbourne, looking to win this title for the second straight year, posted a 3-under 69 for a 36-hole total of 10-under-par 134 at Royal Queensland Golf Club.
'I think I hit 16 greens today which is pretty good out there in windy and blustery conditions,' said Allenby, who hit only 12 greens in round 1 but still managed to turn in a 65.
'I guess it proves that golf is just one of those games. You don't have to hit it great to shoot a great score.'
Craig Parry, who set the tournament record of 19-under-par 269 in winning the 1992 Australian PGA title, shot a 65 to join New Zealand's Richard Lee in second place at 9-under. Lee finished with a 67.
Parry, five shots back of Allenby through the first 18 holes, began on the back nine and reeled off four birdies in a five-hole stretch from the 11th to move to 6-under for the tournament. The Sydney resident dropped a shot with a bogey at the 18th but battled back with three straight birdies after the turn, plus another at the ninth.
'I was playing really well, hitting the ball in the right spots, having a lot of opportunities to make birdies,' Parry said. 'Eight birdies and a bogey, that's pretty good.'
When Allenby started late in the day he found himself two back of early starter Parry. After birdieing the first and 13th holes to tie for the lead, Allenby rolled in the long eagle putt at the par-5 17th to pull two shots clear.
He closed with a bogey at the 18th, however, his first mistake of the event.
Putting proved to be the difference between Allenby's first two rounds this week. While he took just 23 strokes with the flat stick en route to his opening 65, Allenby needed 32 putts in his second-round 69.
Peter Lonard (66) and John Senden (67) tied for fourth place at 8-under.
Geoff Ogilvy (66), Ernie Rose (69) and Mathew Goggin (71) finished three shots off the pace at minus-seven.
Former champion Greg Norman, three back at the start of the day, struggled to a 1-over 73 that featured three birdies, two bogeys and a double-bogey. He slipped into a tie for 27th at 3-under 141.
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