Mark Gerrard, who celebrates his 23rd birthday next month, will start on the wing, replacing Wendell Sailor, who has been sidelined with a knee injury.
Mitchell and Gerrard both made their debuts off the bench this season, while Matt Giteau moves into the fly-half position vacated by Stephen Larkham's season-ending shoulder injury.
Jones said while it was disappointing for Latham, both Mitchell and Gerrard deserve the opportunity to start against the All Blacks.
"Chris got through about 80 percent of the session, but his hamstring just isn't right, so we won't risk him," he said.
"It's disappointing for Chris, but Drew Mitchell is a player who has really developed well since the start of the Test season and brings with him plenty of enthusiasm.
"He was outstanding against the Junior All Blacks for Australia A in Canberra and Sydney, and then over the last three Tests has gained some good experiences as a replacement.
"Mark Gerrard is another player who has made the most of his opportunities this season, and with both Drew and Mark starting a Test for the first time, they'll be pretty excited and enthusiastic."
Hooker Jeremy Paul has shaken off a fitness scare to take his place in the starting lineup, while further changes include Al Baxter returning as the starting tighthead prop, with Matt Dunning moving back to the bench.
David Lyons, who missed the last Test with a virus, will start at Number 8, with John Roe at Number 6 and Phil Waugh in the reserves.
Morgan Turinui will move to inside centre, pairing up with Stirling Mortlock at outside centre.
In the reserves, experienced Wallabies Brendan Cannon and Elton Flatley have both been named in the 22 for the first time this year, with Stephen Moore making way for Cannon, while Clyde Rathbone returns to the team from injury.
Jones said the decision between Flatley and Giteau at fly-half was a tough one.
He added: "Matt Giteau started the first two Tests of the season at flyhalf and will enjoy another opportunity in that role.
"While Elton has been training well, Matt has the skills and form to do well, and Flats will provide valuable depth on the bench."