The Keperra Bowl Champion of 2012 and runner-up after a playoff to Oliver Goss at the PGA Tour of Australasia's West Australian Open Championship was the only player to record consecutive rounds in the 60's, his second round of 68 taking him two clear of Victorian golfer Geoff Drakeford.
The 22 year old Royal Perth golfer is in a rich vein of form at present having also won the Dunes Medal in November.
Canadian Garrett Rank is one shot further back in third position while French Polynesia's Teremoana Beaucousin and Scotland's Ewan Scott are tied for 4th.
The day's best round came from Englishman Garrick Porteous whose 67 moved from an overnight 34th to a share of 7th.
Defending champion Nathan Holman who shared the lead after yesterday's opening round of 67 is now seven shots from Watt's lead.
The event is being played over 72 holes.
Want video tips delivered straight to your inbox? Subscribe to iseekgolf.com newsletters.