The world No.1-ranked Kookaburras have suffered a 2-0 defeat to reigning Olympic champions Argentina in their showdown at the Darwin International Hockey Open.
Argentina, who are ranked second in the world, grabbed the initiative with a quickfire double late in the third quarter at the Marrara Hockey Centre on Wednesday.
Maico Casella fired a drag flick into the backboard from a penalty corner in the 44th minute and soon after the restart Agustin Mazzilli rocketed a shot past goalkeeper Andrew Charter.
The Kookaburras had beaten Argentina 1-0 in a pre-tournament warm-up game on Sunday and the two teams are on track to meet again in Saturday's final of the four nation competition.
Australia, who beat Malaysia 5-2 on Tuesday, now need to beat Japan in their final round round game on Friday to be assured of making the final.
Argentina are the only unbeaten team after opening their schedule with a 2-1 win over Japan on Tuesday.
In Wednesday's other match Malaysia had to settle for a 3-3 stalemate with Japan, who equalised with a minute to play.
