Richard Green came in second at 11-under-par 133 after a round of 67. Adam Scott, who played alongside Els, posted a 68 to join Peter Fowler at 10-under-par 134.
One day after coming close to a 59 on the Composite Course at Royal Melbourne Golf Club, Els showed he was ready to get back to business with a birdie at the par-5 10th, his first.
'We decided to try and get yesterday's round out of our minds as soon as possible,' said Els, who fired a European Tour record-tying 60 on Thursday. 'It is hard to do but starting on the 10th hole and birdieing my first hole settled me down again.'
At the par-4 15th, a hole he bogeyed on Thursday, Els played his approach to 16 feet and drained the putt for his second birdie of the day.
The South African continued his fine play on the front side and reached the green in two at the par-5 second. Els' eagle try failed to find the bottom of the cup but he tapped in for another birdie to move to 15 under.
Els closed his round with a flurry of birdies starting with a lengthy putt at the par-4 seventh.
He then dropped his tee shot inside six feet for a birdie at the par-3 eighth and was on in two at the par-5 ninth.
Els again missed an eagle opportunity but walked away with his third consecutive birdie to establish a new 36-hole record for strokes under par.
'I think I basically hit all the greens,' said Els, who is trying to win this event for the third straight year. 'The only difference was that I probably did not hit it as close as I did to the hole yesterday. I played a little safer today and I felt that the flags were more difficult today.'
Els is no stranger to setting records in Australia. Last year, the Big Easy established the 72-hole record for strokes under par at the Johnnie Walker Classic at Lake Karrinyup.
'I don't want to put any targets in mind,' Els said, when asked of the possibility of matching his 72-hole record of 29-under par. 'I want to go out there and play. I am enjoying it so far. Let's see what happens. If we have a chance for that on Sunday I might start thinking about that.'
Scott picked up five birdies and a bogey to finish eight shots off the pace.
'I don't see anyone catching him at the moment,' Scott said of Els.
Peter O'Malley, Gareth Paddison and Mahal Pearce tied for fifth place at 9-under-par 135.
Michael Campbell, who has won this event twice, posted an even-par 72 to join Ian Poulter, Stephen Gallacher and Scott Gardiner at 8-under-par 136.
Peter Senior, who captured this event in 1993, was one shot further back at 7-under-par 137 along with Miles Tunnicliff, Peter Hanson, David Howell and David McKenzie.
Greg Norman collected three birdies and three bogeys for a round of 72 to finish on the cut line at 1-under-par 143.
Among those who failed to qualify for the weekend were Ian Woosnam, who won this tournament in 1996, 2003 European Tour Rookie of the Year Peter Lawrie and American Ricky Barnes.