Chasing a massive total of 343 for a win, England were bowled out for 231 with only James Taylor putting up a lone fight with an unbeaten 98.
"There's no disgrace in defeat, but the way they racked up runs was embarrassing," Gooch said.
England had a hold of Australia at one stage having them at 70 for three but the 146-run stand between Aaron Finch and George Bailey laid the platform for the perfect finish of 105 runs in the final 10 overs.
Gooch believes England’s bowling lacked variation which was the reason for the onslaught at the end.
"You have to have a full armoury of deliveries for the last few overs.
"It's all about variation and what you saw from England was a concentrated attack of similar deliveries.
"I was gob-smacked by the way they bowled at the end. Our side is full of talented cricketers but it's delivering that talent under pressure."
The former batting coach also described the England captain, Eoin Morgan as a match-winning player and further stressed on the need for the Middlesex batsman to lead from the front if England are to do well in the tournament.
"He's in a bad run but he's a match-winning player and England desperately need him to be leading the way.
"Morgan's a bit vulnerable outside off-stump but he should retain his attacking instincts - that where his skills lie."
England will take on New Zealand in their second encounter of the World Cup in Wellington on Friday.
© Cricket World 2015