The German was 0.1 seconds quicker than Hamilton and 0.715secs clear of the Ferrari of Sebastian Vettel in third.
Vettel’s team-mate Kimi Raikkonen was fourth, ahead of Williams’s Valtteri Bottas and Daniil Kvyat’s Red Bull.
McLaren’s Jenson Button was 12th, 3.69secs off the pace, while team-mate Kevin Magnussen crashed.
The Dane, replacing Fernando Alonso this weekend and perilously short of mileage after completing just 39 laps in pre-season testing, lost control at Turn Six early in the session and broke the car’s front suspension against the barriers.
He said he “lost the rear” after the car “took him by surprise”.
The Manor Marussia team, who only just made it to the first race after an 11th-hour rescue by a new investor, did not do any laps.
Neither did Williams’s Felipe Massa, whose Mercedes engine had a water leak, and Red Bull’s Daniel Ricciardo, who needed his Renault engine changed.
Lotus’s Pastor Maldonado and Toro Rosso’s Max Verstappen also had troubled sessions as a result of reliability problems.
After two sessions in glorious Australian sunshine, Mercedes appeared to have an advantage of in the region of at least 0.8secs whether in low-fuel qualifying trim or high-fuel race trim.
Ferrari and Williams appear to be next in line with perhaps a small advantage over Red Bull, although Ricciardo’s absence from the session meant judging the pace of the former world champions was difficult.
The Sauber cars missed the first session as their court dispute with Dutch driver Giedo van der Garde continued, but both Felipe Nasr and Marcus Ericsson ran in the second, with the Brazilian 11th fastest and the Swede 15th.
Sauber and Van Der Garde, who won his case claiming he has a valid contract with the team for this season, are now in negotiations to try to settle the case out of court.
|Australian Grand Prix Second Practice Results|
|Pos.||Car #||Driver||Best Time||Behind||Gap|
|7||55||Carlos Sainz Jr||1:30.071||-2.374||-0.055|