Herbert steadied after a brief wobble to open up a three-stroke break over the field late in his second round at Kingston Heath on Friday.
Smith had been just one stroke behind in second spot after a brilliant five-under-par front nine but, in a dramatic twist, finished his round eight shots behind Herbert.
The 2022 British Open champion imploded down the stretch after officials placed Smith and his playing partner, newly crowned Australian PGA champion Elvis Smylie, on the shot clock for slow going.Â
Smith racked up three birdies and a double-bogey six on the 16th hole after also copping a penalty for an unplayable lie after his errant drive.
Cameron Smith had a blazing start to his second round, but suffered a back-nine collapse. (Con Chronis/AAP PHOTOS)
In the space of barely two hours, Smith followed his outward 31 with an inward 41 to eventually sign for an even-par 72.
The clock-shot warning didn't faze Smylie, though, as the 22-year-old carded a sublime round of 64 to rocket into a tie for third at nine under.
He had been three over through seven holes on Thursday, but has since amassed 13 birdies to roar back into contention to complete a rare golden summer double of twin victories at Australia's two flagship golf tournaments.
Defending champion Joaquin Niemann was another major mover on Friday with a 66 at Victoria.
The Chilean LIV Golf star reeled off six birdies in a seven-hole stretch, then another two late to rise to four under for the championship.
His playing partner Min Woo Lee is one stroke further back at three under after shaking off a dreaded double bogey on the 17th, his eighth hole of the day, in a round of 71.
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