Watkins replaces Newcastle United's Callum Wilson after a fine start to the season with Aston Villa -- netting seven times in 11 games including a hat trick against Brighton last weekend -- while Bowen has five goals in seven matches for West Ham United and takes up a spot vacated by injured Crystal Palace winger Eberechi Eze.
There were no conversations this time with Southgate opting for Bowen instead.
"We spoke before the last squad," Southgate told a news conference when asked about Sterling. "We've been happy with the wide players and the performances in the last four games in particular, and the two in March.
"The team are playing really well so clearly there is some stability there. We have added Jarrod Bowen in those wide areas. He's playing really well and with the Australia game there is an opportunity to learn some different things as well."
Southgate revealed that Wilson's call-up was placed in doubt by questions over his fitness, influencing his decision to select Watkins, who has scored two England goals in seven appearances, the last of which came against Cote d'Ivoire in March 2022.
"Callum is carrying an injury, we're not certain he'd be available," Southgate said. "Ollie has started the season well, he has hit a bit of scoring form in the last couple of weeks.
"You have to be careful with that, you can't just go on recency bias when you are looking at selection but he is in good form.
"He is coming in on a high. We know his character, we know his personality. He's a good guy around the group. He's playing for a team that is really well coached and the team are in a good moment."
"He is still being assessed," said Southgate of Saka. "Obviously they've got a big game this weekend and then there's another seven days before we play Australia and 10 days before we play Italy so everybody will monitor everything as we go forward."
City defender John Stones has also been recalled following a thigh problem.
Southgate also voiced his disapproval of VAR, citing the 2019 Nations League semifinal when Jesse Lingard had a goal ruled out on review for offside -- a moment which would have put England 2-1 up against Netherlands with less than 10 minutes to play. They lost the game in extra-time.
It was the first time VAR had been used in a national team competition run by UEFA.
"You say I was at the forefront of it, I wasn't for it," Southgate added. "My first experience of it, I'm still not sure if the Jesse Lingard goal that knocked us out of the semi-final was legit or not.
"I don't like it. I think we should just accept referees' decisions but I also know we are unlikely to go back to a world where we don't have technology as part of that decision-making process.
"It was never going to resolve every issue. I don't think there is any solution that will achieve that."
Defenders: Levi Colwill (Chelsea), Lewis Dunk (Brighton & Hove Albion), Marc Guehi (Crystal Palace), Harry Maguire (Manchester United), John Stones (Manchester City), Fikayo Tomori (AC Milan), Kieran Trippier (Newcastle United), Kyle Walker (Manchester City)
Forwards: Jarrod Bowen (West Ham United) Phil Foden (Manchester City), Jack Grealish (Manchester City), Harry Kane (Bayern Munich), James Maddison (Tottenham Hotspur), Eddie Nketiah (Arsenal), Marcus Rashford (Manchester United), Bukayo Saka (Arsenal), Ollie Watkins (Aston Villa)