The German set a new lap record for the Melbourne street circuit with a time of one minute 26.892 seconds in Saturday's official qualifying session.

Brazilian Rubens Barrichello made it an all-Ferrari front row, snatching the second fastest time in the final minute to frustrate Mika Hakkinen in the leading McLaren.

After claiming his first Australian pole position and the 33rd of his career, Schumacher said: "Now we have to show it's reliable. We can do that tomorrow."

Finn, Hakkinen admitted to not being too concerned about starting in third place, having failed to finish from pole in the last two seasons.

"In the last couple of years I have been on pole here by quite a big margin and you all know what has happened in the race.

"I definitely didn't get the best out of the car, but I'm confident we can get a consistent car for the race, and a quick car."

Britain's David Coulthard could only manage a disappointing sixth place, having earlier been the fastest in the morning's practice session.

Jenson Button's first qualifying session with Benetton saw him placed 16th fastest, five places better than he managed on his Grand Prix debut last season with Williams.

Eddie Irvine was 12th for Jaguar, but team-mate Luciano Burti forced crashed heavily into a perimeter wall.

He escaped unscathed as both left-sided tyres were ripped from his car and caused the session to be interrupted for 12 minutes.

Minardi driver Tarso Marques will be allowed to race despite failing to meet qualifying standards.

Under FIA rules, all drivers must post a time within 107 per cent of the fastest qualifier to earn a start in a race.

Marques had looked to have just done enough to qualify for the race when he lost control of his Minardi and spun off.

But then Schumacher set his new lap record and without a spare car in the Minardi team Marques had to use his team-mates car in a failed effort to edge closer to Schumacher's time.

The stewards later decided there were exceptional circumstances and said Marques could start from the back of the grid.

Qualifying times for Sunday's Australian Grand Prix:
1. M. Schumacher (Germany) Ferrari 1 min 26.892 secs
2. R. Barrichello (Brazil) Ferrari 1:27.263
3. M. Hakkinen (Finland) McLaren 1:27.461
4. H-H. Frentzen (Germany) Jordan 1:27.658
5. R. Schumacher (Germany) Williams 1:27.719
6. D. Coulthard (Britain) McLaren 1:28.010
7. J. Trulli (Italy) Jordan 1:28.377
8. J. Villeneuve (Canada) BAR 1:28.435
9. O. Panis (France) BAR 1:28.518
10. N. Heidfeld (Germany) Sauber 1:28.615
11. J. Montoya (Colombia) Williams 1:28.738
12. E. Irvine (Britain) Jaguar 1:28.965
13. K. Raikkonen (Finland) Sauber 1:28.993
14. J. Alesi (France) Prost 1:29.893
15. J. Verstappen (Netherlands) Arrows 1:29.934
16. J. Button (Britain) Benetton 1:30.035
17. G. Fisichella (Italy) Benetton 1:30.209
18. E. Bernoldi (Brazil) Arrows 1:30.520
19. F. Alonso (Spain) Minardi 1:30.657
20. G. Mazzacane (Argentina) Prost 1:30.798
21. L. Burti (Brazil) Jaguar 1:30.978
22. T. Marques (Brazil) Minardi