Defending champion Cameron Smith shot a seven-under 65 to open a one-shot lead after the second round of the Australian PGA Championship on the Gold Coast, as home favourite Marc Leishman moved into contention.

Starting the day four strokes adrift at Royal Pines Resort, Smith completed 36 holes with a nine-under total of 135 to sit just ahead of Australian number two Leishman and Queenslander Jake McLeod at the European Tour co-sanctioned event.

Smith, who teamed with Leishman to help Australia claim a share of second place at the World Cup of Golf last Sunday, roared out of the blocks with six birdies and a bogey to reach the turn five-under for his round on 31.

He added another two birdies in a bogey-free back nine to be well placed at a tournament he won in a playoff last year.

"I did a little bit of extra work this morning on the green and it paid off. I was actually getting putts to the hole today, which is nice," Smith told reporters.

Leishman fired a second successive 68 but squandered a chance for a share of the lead with a bogey on the 16th.

Overnight co-leader McLeod broke clear of the field with an eagle on the par-five 12th but stalled with a bogey on the next hole before relinquishing the lead with a double-bogey on the 17th.

Australians Dimitrios Papadatos, Matt Jager and Christopher Wood were tied for fourth on seven-under, one ahead of American Harold Varner III, the 2016 champion. 

All three of Ireland's representatives missed the cut of level par. Michael Hoey's first round of 78 meant that today's of 72 wasn't enough while Cormac Sharvin and Robbie Dawson also missed out.