The Australian media has labelled the Aussie batting line-up as the worst ever in an Ashes series, and with the tourists in danger of breaking their record by losing more than three Tests in the series some commentators have suggested that the team are on their way to being the worst Australian cricket side ever to play England.
The 43-year-old McGrath, writing in The Guardian, appeared to agree as he argues that countrymen have reached a new low.
But the legendary bowler believes Australia's situation is salvageable if the top six batsmen can put a higher price on their wickets and off-spinner Lyon is in the team when the third Test begins at Old Trafford on August 1.
"They say that you have to hit the bottom before you can start to get back up," he wrote. "And that is where this Australia team are right now: rock bottom.
"If these players have not heard the wake-up call by now, then they do not deserve to be in the Australia team. They have to turn this series around right now.
"If they don't, some of the blokes in this squad could find that their international careers end with the fifth Test at The Oval."
Teenager Agar's sparkling 98 with the bat on debut was the highlight of the first Test for Australia but his left arm finger spinning has earned him just two wickets at a cost of 248 runs in the two matches so far.
"Nathan Lyon, between his debut in 2011 and the start of this series, took as many wickets in Test cricket as any other Australian bowler, 76 at an average of 33. He should start the next Test," McGrath wrote.
"I also expect Fawad Ahmed, who just took eight wickets in a match for Australia A in Zimbabwe, to come into the squad.
"I like Ashton Agar and admire his energy but on these dry pitches, we need a spinner who can make more of an impact on a match than he is able to at this early stage in his career."
McGrath's expectations for Pakistan-born leg-spinner Ahmad, who was fast-tracked through the citizenship process to make him available for the series, might not be fulfilled.
Australia coach Darren Lehmann has said he will not be looking outside his squad for reinforcements ahead of the Old Trafford Test, albeit before it was announced that James Pattinson had been ruled out of the series by injury.
McGrath's recipe for improving the batting was not personality change but simply that the batsmen play better, starting with under-fire opener Shane Watson.
The former paceman said, like England quick James Anderson, he would be targeting Watson's weakness for being out lbw if he was bowling against him.
"He has always promised a lot and now he has to deliver," added McGrath.
"I think he needs to score at least a couple of hundreds in what is left of this series, because he is one of those guys who is, potentially, at crunch time in his Test career."