England took an early lead through Jermaine McGillvary, but Australia were ultimately too strong and put in a performance that always left England struggling to claim their first win over their old rivals since 1995.
England have reached the semi-finals at the last three World Cups, and Wayne Bennett's men got off to the perfect start in Melbourne as McGillvary touched down in the corner after receiving a high pass from Gareth Widdop.
The conversion was missed but England continued to set about putting in the defensive performance which was required to minimise the threat offered by the hosts and pre-tournament favourites.
However, once the first quarter of the game had passed, Australia began to dominate and it came as no surprise when Matt Gillett powered over the line to get Australia back on level terms, before Cameron Smith sent over the extra two points.
Before the half-hour mark, Australia extended their advantage through Billy Slater, who executed a clever dummy before touching down for his team's second try in seven minutes.
An injury to Sam Burgess led to one of England's key men spending the period before the break off the pitch, but England were able to see out the remainder of the first half without further damage.
Burgess would begin the restart on the sidelines with his knee in a brace but to England's credit, they were much improved during the opening stages of the second period.
Jonny Lomax nearly went over as he failed to collect a pass from Luke Gale, but Australia remained a threat each time they ploughed forward in search of the try which would put them within touching distance of the win.
Slater knocked on when seemingly ready to touch down but as the game entered the final five minutes, Smith sent over the penalty that put England two tries away from an improbable win.
England were left needing to throw caution to the wind but it only allowed Australia to take advantage of the space and Josh Dugan was able to run the full length of the pitch to register the home team's third try of the night, and with it seal the perfect start to their campaign.