"The umpires came up to us and said they think it's unfit for international cricket.
"When you've got a lot of people in the crowd, it's a brave call to make but it's good that they are making those calls."
Collingwood and Australian counterpart Michael Clarke spent several minutes together at the contentious end before agreeing that the fast bowlers would be taking off in an area too muddy to avoid the risk of injuries.
"I spoke to Michael and both of us said if you're asking your boys to run in 100% then it is going to be pretty dangerous. That's why the umpires made that decision," he said.
Clarke added: "It's very disappointing, but the ground's not good enough. If Brett Lee was running up to bowl, I can't imagine it being safe enough."
It was a hugely frustrating outcome for the 19,500 spectators inside the ground, many of whom remained in their seats for several minutes after being told there would be no play.
It was also a hugely disappointing outcome for Old Trafford bosses, who also had to contend with the abandonment of the first match in the series on Saturday.
Despite the installation of a £600,000 drainage system, it remained unclear why the run-up at the Stretford End was fine while the Brian Statham End remained perilously muddy.
"It's a disaster which I think could have been avoided," said Lancashire chief executive Jim Cumbes, who suggested the players should have been prepared to play.
"I'm bitterly disappointed for the people out there who have paid £50. We have got to rethink how we treat our public in cricket.
"I think the covers were good enough. If this was a domestic game on a Friday night against Yorkshire we'd have been playing.
"I don't see what the difference is between this and international cricket. If we can't play international Twenty20 cricket in those conditions, we shouldn't be playing it at all.
"I spoke to [former Australian paceman] Jeff Thomson, who said it was perfectly OK. There was nobody who ran in faster than him."
Collingwood suggested it was not just the run-up at the Brian Statham End which was a worry.
"There were other areas of concern such as the backward point area," he said. "The umpires deemed it unfit for play and both captains agreed with him.
"It's going to take a little bit more time for these drainage systems to bed in but you can't beat Mother Nature.
"There was a hell of a lot of water that fell on the ground this afternoon. You feel for the spectators who have turned up. Australia have got players who came over specifically for Twenty20 cricket."
Sports minister Gerry Sutcliffe, who was in the crowd, commented: "I can well understand the frustration of the fans at Old Trafford.
"Of course the safety of the players is paramount but decisions should have been taken sooner. It is not right to have fans finding out the game has been abandoned from listening to the radio or TV.
"I hope the sport's paying customers are treated better in future."
The England and Wales Cricket Board is expected to investigate the situation as they reflect on another expensive insurance claim to pay back disappointed fans.
A one-day international against West Indies at Headingley earlier in the season was abandoned in similar circumstances, again despite a new drainage system being in place.
England and Australia now face off in seven one-day internationals, starting at The Oval on Friday and finishing off in the north-eastern enclave of the Riverside on 20 September.
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