Australia piled up 342 for nine after being put into bat and England were bowled out for 231, only a valiant 98 not out by James Taylor saving them from an even more emphatic loss.
"There's no disgrace in defeat, but the way they racked up runs was embarrassing," Gooch told the BBC.
England captain Eoin Morgan was out for nought, his fourth duck in his last five innings.
"He's in a bad run but he's a match-winning player and England desperately need him to be leading the way," Gooch said.
"Morgan's a bit vulnerable outside off-stump but he should retain his attacking instincts - that where his skills lie."
England reduced Australia to 70 for three but conceded 105 runs in the last 10 overs as Glenn Maxwell plundered 66 off 40 deliveries.
"You have to have a full armoury of deliveries for the last few overs," said Gooch, who worked closely with the team as batting coach until leaving the role last year.
"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."
England's next game is against co-hosts New Zealand in Wellington on Friday.
(Reporting by Ed Osmond, editing by Pritha Sarkar)
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