Australia's outstanding centre Matt Giteau, who had set up their first-half tries for hooker Jeremy Paul and full-back Chris Latham as well as kicking a 42nd-minute penalty, had the final say with two more late penalties.
Australia's other points came from fly-half Elton Flatley who converted Paul's opening try before retiring hurt midway through the first-half.
After England were totally out-played in the first-half their forwards were transformed after the interval as they turned on the power.
Lewis Moody opened their account after the pack drove him over for a 48th minute try with wingers Josh Lewsey and Mark Cueto both crossing in the space of three minutes midway through the second half.
Centre Mike Tindall, England's third kicker of the afternoon converted both to edge his side 19-15 ahead but Australia proved they can never be written off with Giteau's two late penalties.
In the end England showed just how badly they are missing the injured Jonny Wilkinson.
Fly-half Charlie Hodgson, outstanding in last week's win over South Africa, squandered two simple first-half penalties and then scrum half Andy Gomarsall missed an even simpler conversion.
England: Robinson, Cueto, Paul, Tindall, Lewsey, Hodgson, Gomarsall, Rowntree, Thompson, White, Grewcock, Borthwick, Worsley, Moody, Corry.
Replacements: Cohen for Cueto (74), Greenwood for Paul (25), Ellis for Hodgson (69).
Not Used: Titterell, Sheridan, Kay, Hazell.
Australia: Latham, Sailor, Turinui, Giteau, Tuqiri, Flatley, Gregan, Young, Paul, Baxter, Harrison, Vickerman, Smith, Waugh, Lyons.
Replacements: Rogers for Flatley (26), Dunning for Young (62), Hoiles for Lyons (75).
Not Used: Cannon, Samo, Henjak, Mitchell.