Palmer will win his 42nd cap while young gun Launchbury will be hoping to win his second in the game against Australia at Twickenham this Saturday.
The only change to the squad comes in the form of Saracens wing Chris Ashton who will take over on the right from Charlie Sharples, who moves to the left in place of Ugo Monye.
England Head Coach Stuart Lancaster said: "To select 23 from a squad of 30 plus who have trained so well, with such intensity and focus, was difficult but it's a good position to be in. The "team first" mentality of all our squad has impressed us greatly.
"We were pleased with lots of aspects of our performance last week, but we know we need to improve this week and, by having some consistency in selection, we allow those players to demonstrate we can step up to the next level against what will be a very tough Australian side."
Meanwhile Wasps prop Zak Taulafo is starting for Samoa this Friday night against Wales. Andrea Masi is expected to be involved in the Italian squad to play New Zealand this Saturday in Rome. Tinus Du Plessis will feature for Namibia this weekend against Spain and USA Paul Emerick is set to face Tonga.
England (v Australia, 2.30pm Saturday, Twickenham Stadium)
15. Alex Goode (Saracens, 3 caps)
14. Chris Ashton (Saracens, 26 caps)
13. Manusamoa Tuilagi (Leicester Tigers, 14 caps)
12. Brad Barritt (Saracens, 8 caps)
11. Charlie Sharples (Gloucester Rugby, 3 caps)
10. Toby Flood (Leicester Tigers, 51 caps)
9. Danny Care (Harlequins, 34caps)
1. Joe Marler (Harlequins, 4 caps)
2. Tom Youngs (Leicester Tigers, 1 cap)
3. Dan Cole (Leicester Tigers, 32 caps)
4. Tom Palmer (London Wasps, 41 caps)
5. Geoff Parling (Leicester Tigers, 9 caps)
6. Tom Johnson (Exeter Chiefs, 4 caps)
7. Chris Robshaw (Harlequins, capt, 9 caps)
8. Thomas Waldrom (Leicester Tigers, 3 caps)
16. David Paice (London Irish, 3 caps)
17. David Wilson (Bath Rugby, 20 caps)
18. Mako Vunipola (Saracens, 1 cap)
19. Joe Launchbury (London Wasps, 1 cap)
20. Tom Wood (Northampton Saints, 10 caps)
21. Ben Youngs (Leicester Tigers, 25 caps)
22. Owen Farrell (Saracens, 9 caps)
23. Mike Brown (Harlequins, 8 caps)