With Brazilian team mate Rubens Barrichello [ Images ] following Schumacher around the Albert Park circuit, the flaming red cars crossed the line in isolated splendour to celebrate a first one-two finish since Japan [ Images ] 2002.
It was the German's 71st win, fourth in Australia [ Images ], and one of the more straightforward of a Formula One career that has brought him a record six titles.
"I have nothing to win any more but I just love the sport, the fighting on the circuit," said the 35-year-old. "I want to do this and enjoy it as much as I can.
"This car goes well, we have seen that all weekend. I can now go home with two more points than I had last year after three races."
As Stephanie Sheene, widow of the late British motorcycling champion Barry, waved the chequered flag the champion was 34.6 seconds ahead of Spaniard Fernando Alonso's [ Images ] third-placed Renault [ Images ].
"I was in the middle of nowhere," said Alonso, who was too slow to catch the Ferrari but too quick to be threatened by the cars behind him.
Both were lapped by Schumacher in a race that suggested an ominous return to the Ferrari 'Formula Yawn' dominance of 2002, which led to sweeping rule changes and resulted in one of the closest seasons in recent years in 2003.
Schumacher rejected the suggestion, however: "I think if we had a clear run last year, we would have seen a similar situation," he said.
McLaren's Kimi Raikkonen [ Images ], last year's overall runner-up and a championship favourite, made only a brief appearance before joining the spectators as the season's first retirement.
The Finn was sluggish off the grid and skidded off at turn three after nine laps while running 12th.
"We lost water pressure and then the engine went," said the 24-year-old.
"We were not expecting 10th place on the grid. It's very disappointing. We shouldn't be in that position, we should be fighting for first place. Nobody's happy."
While a marshal sprayed foam over the back of his smouldering car, Schumacher and Barrichello covered the miles without missing a beat.
The two red cars made a smooth getaway, leaving Alonso to provide the thrills behind them as Renault picked up the mantle of Ferrari chasers from Williams and McLaren.
The Spaniard threw his car round the outside of Montoya, putting two wheels on the grass and outbraking the Colombian as he swept through from fifth on the grid to third.
"I took Jenson and Montoya and then it was an easy race," said Alonso.
Montoya was pushed back from third to seventh, triggering an aggressive fightback from the Colombian whose determination showed as he forced Button on the runoff on lap 39 as he outbraked the Briton.
Australian hopes were snuffed out on lap 29 when Jaguar's Mark Webber [ Images ], who had climbed to third place during the first round of pitstops, retired.
"I tried to stay out there, I was enjoying it," he said. "It was going okay. I was trying to hang on to the back of the big guys but we lost sixth and seventh gears."
"You have to take the rough with the smooth."