The Irish pack leader claims the men in green merely have to become more clinical to reach their goal of matching sides like Australia and New Zealand.
Speaking immediately after the 18-12 defeat to the Wallabies in Melbourne, the Munster giant was critical of the errors that he and his team mates made in a game that finished two tries apiece.
"We need to start stepping up. We stepped up today, but we are making too many mistakes," said O'Connell.
"If we want to get to that next level we have to cut them out. If we had done that today we would have won the game.
"We conceded two soft tries. Matt Giteau shouldn't have been allowed to off load for the second try, and the same with Loti Tuqiri for the first.
"The southern hemisphere sides are good at converting chances into points and that is what we need to get better at.
"Despite a poor World Cup, Irish rugby is in a good state and there are good players who are working very hard. Now we need to bring the results out of that hard work.
"England came down here are won before they went on to win the World Cup and that's what we need to be trying to emulate."