Australia has dominated day two of the New Year's Test, with Thursday's action at the SCG highlighted by a classy century from Usman Khawaja.

England finished a rain-shortened day one with its brightest start to a match of this Ashes series, with their quicks taking a wicket each on Wednesday.

Only 46.5 overs were possible as the nagging rain hung over the ground, cutting the play short and finishing the day at an intriguing 126-3 to kick off day two.

Steve Smith and Khawaja, who both boast an impressive record at the SCG, survived the entire morning session and were unbeaten at lunch on day two.

Seamer Stuart Broad struck twice early in the afternoon session to keep England in the contest, but Khawaja continued his resistance at the other end.

Khawaja brought up his ninth test century just before the tea interval, completing his redemption story.

Khawaja's masterclass ended on 137, with Broad claiming a well-deserved five-wicket haul – his second on Australian soil. Skipper Pat Cummins declared the Australian innings to a close on 416-8.

Australia's day came to a disappointing end, however, with Mitchell Starc taking a wicket on a no-ball in the penultimate over.

Starc found the outside edge of England opener Zak Crawley, with David Warner taking the catch at first slip.

As the Australians celebrated the breakthrough, replays showed that Starc had overstepped the popping crease.

Crawley was gifted an extra life on 0, and England's openers survived to stumps.

England will resume at 13 without loss on day three, still trailing Australia by 403 runs.