The Australians, in a battle with England for the fourth qualifying spot from the Sevens World Series to avoid the regional qualifiers, were then beaten 17-14 by Scotland before bouncing back to overcome New Zealand 19-14 in a dead rubber.
Scotland beat Portugal 17-12 to join the All Blacks in advancing to the last eight from Group B.
Australia, who will now look to repeat last week's success in the second tier plate tournament, looked off the pace from the start as they slipped 12-0 behind to the Portuguese in the first half.
The Iberians, who claimed a shock 24-24 draw with the All Blacks in Honk Kong, then held firm as the Australians fought back with two tries but their inability to convert either resulted in defeat.
The sluggish play continued as Scotland raced 14-0 ahead before the Australians drew level only for Colin Gregor to strike a penalty after the final buzzer to seal the win.
England, meanwhile, showed their intent to improve on a disappointing showing in Hong Kong last week by reaching the last eight from Group A after beating Wales and Hong Kong.
The English, though, were no match for last week's champions Fiji, who won the four-team group with a thumping five-try 33-19 victory in the pool decider.
Also advancing to the quarter-finals of the seventh leg of the campaign were series leaders South Africa and Canada from Group C, while France edged Japan 24-19 in the final match of the day to qualify ahead of the hosts in Group D.
(Writing by Patrick Johnston in Singapore)
Share
