With a key Euro 2024 qualifier against holders Italy on Tuesday, the England manager used the opportunity to rest first-team regulars, including captain Harry Kane, and give game time to some younger squad players.
Only three of the starting 11 had more than 10 caps, with 10 changes to the side that beat Scotland 3-1 in England's last international and Chelsea defender Levi Colwill making his debut.
Watkins, returning for the first time since March 2022, slid the ball in at the far post in the 57th minute after Jack Grealish fired across goal.
It was the Aston Villa forward's third goal for England and second in successive matches, although 563 days apart.
"It has been a long time coming. I have been waiting a long time for the next call-up. I was looking forward to it and I wasn't going to let this opportunity slip," Watkins told Channel Four television.
"It was a tough game. A lot of us haven't played together before. We got the goal and saw it out. There's obviously a lot to work on."
Southgate rang the changes after the break against opponents who could easily have been ahead in the first half, with Watkins making way for debutant Eddie Nketiah in the 73rd among a flurry of substitutions.
NO THRILLER
The match was only England's second friendly since March last year, and the first men's international at Wembley to have a female referee with France's Stephanie Frappart blowing the whistle.
It was no thriller, with the experimental England lineup looking disjointed and vulnerable in defence despite having plenty of possession.
Watkins also had England's best chance of the first half when he rounded Australia goalkeeper Mat Ryan in the 33rd but saw his shot towards the far corner bounce off the post.
England had already missed a good chance in the eighth minute when Conor Gallagher sent a low cross in from the byline but neither James Maddison nor Watkins could get a touch to it.
While the hosts had to wait 42 minutes before securing their first corner, Australia could easily have taken the lead.
England's Sam Johnstone made a diving save from Keanu Baccus in the 11th while Lewis Dunk kept their clean sheet with a vital 44th-minute block from Ryan Strain with the keeper beaten.
Connor Metcalfe could also have equalised for Australia with 10 minutes left when he headed against the post from a corner.
The win was Southgate's 55th as England boss.
Both teams wore black armbands and there was a period of silence for the victims of the conflict in Israel and Palestine.
The Football Association's decision not to light up the stadium's arch in blue and white in solidarity with Israel, following last week's attacks by Palestinian militant group Hamas, earned a government rebuke on Thursday.
