The home team, already 1-0 up in the five-match series, are set to extend their lead after taking complete control of the second Test at Lord's.
Gough was at the home of cricket to watch the first two days and declared himself "amazed" at Australia's first-innings capitulation for 128.
"The way they batted was absolutely remarkable," he told Reuters in an interview while attending the third day of The Open at Muirfield.
"Australia had bowled England out for 361 and they should have been all set to come out and dominate. When opener Shane Watson was out in the last over before lunch and reviewed it, that was a terrible decision by him.
"I think that's the problem for Australia - they are more worried about their own personal performances than the team.
"(Captain) Michael Clarke reviewed both his decisions in the first Test and they were wrong, Watson has also reviewed so many decisions in recent Test matches. It just goes to show they're not using the review system well."
Gough, who took 229 wickets at an average of 28.39 in 58 Test appearances for England between 1994-2003, said leading batsmen got themselves out on Friday.
"(Usman) Khawaja, Watson, (Phil) Hughes, there were some poor shots all day and it's been a problem for Australia this season," he said after hosting a Q&A session with golf's former world number one Nick Faldo in the MasterCard Club at Muirfield.
"I thought the Ashes series was going to be really close but the way Australia have batted in both Tests has been a huge disappointment.
"If you take out the number 11's (Ashton Agar) 98 not out in the Nottingham Test, they would have lost in three and a half days," said the 42-year-old Gough.
"The way they're going at Lord's they will lose by day four and questions will be asked about an England clean sweep."
Former England great Ian Botham forecast a 5-0 victory for the hosts at the start of the series and Gough is starting to feel that result is a distinct possibility.
"I thought that was a bit of a joke when people said that before the series but now I'm starting to believe it myself," he said.
"Australia coach Darren Lehmann is a great lad. I played with him at Yorkshire for five years and he will lift the team but when you start losing, the cracks that people have been talking about within their team will start reopening.
"When you lose, those cracks widen. Darren's got to somehow make changes, freshen it up."
Gough, who also took 235 wickets in 159 one-day internationals, said he was at a loss to explain Australia's decision to send controversial batsman David Warner off to join the A squad in Zimbabwe and South Africa.
"Warner, for me, should be in the XI but for some reason he is with the A team," added Gough of the batsman who was banned last month for punching England youngster Joe Root in a Birmingham bar following a Champions Trophy match.
"He should be batting at number three in this Test, he's got aggression and has got a bit of fight in him. That's what you want in your team.
"For some reason Khawaja's playing and he's not. I find that remarkable."
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