Unheralded American Jordan Gumberg had placed the big guns on notice after capturing the early clubhouse lead, but Herbert and Smith responded in style.
Two weeks after denying Smith at the NSW Open at Murray Downs, Herbert opened with a brilliant eight-under 63 and continued his blitz with an eagle-birdie-birdie start on Friday.
The Bendigo-born star reached the turn at 12 under and holding a one-stroke lead over Smith, who also opened with an eagle before picking up three birdies at the third, fifth and sixth holes.
Gumberg had earlier followed up his opening round of 65 at Kingston Heath with a 69 at the neighbouring Victoria Club to surge to nine under for the championship.
Rising star Harrison Crowe matched Gumberg's 69 at Kingston Heath, while exciting young Chinese Wenyi Ding carved out a seven-birdie 64 at Victoria to also hit eight under.
After missing the cut at last week's Australian PGA Championship in Brisbane, Ding ditched his caddie and it paid dividends as the 20-year-old soared 52 spots up the leaderboard on Friday.
Crowe, the former YouTube sensation and NSW Open and amateur champion, mixed six birdies with three bogeys in his roller-coaster round.
Kiwi Daniel Hillier was one stroke further behind at seven under and safely in the clubhouse after a 68 at Victoria.
Playing with Smith and Herbert, newly crowned Australian PGA champion Elvis Smylie burnt through the front nine in five under to be six under overall and suddenly back in the tournament.
But Smith and Herbert look the players to beat for the Stonehaven Cup.
After shooting 65 on Thursday, Smith seemed on a mission to take Kingston Heath apart after blasting officials pre-tournament for setting the famous sandbelt layout for "American-style" target golf.
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.
