The loss left Mexico in last place in Group D with zero points, six behind group leader Italy and three back of both Argentina and Australia. Mexico has one game remaining on Thursday against the Italians.
Two teams from each group plus three third-place teams will advance to the second round.
Victor Quiroz gave Mexico the lead in the seventh minute, taking a short, rolled ball off a free kick from Francisco Cati and sending a sharp low shot past onrushing Australian keeper Peter Spathis.
But Tobias Seeto then rallied Australia in a span of 18 seconds. He first took a ball down the left side and from the edge of the area near the end line hit a high, hard shot that went over the outstretched arms of Mexican keeper Miguel Estrada in the 27th minute.
He then led a fast break along the left, and with Estrada coming off his line, chipped the ball from just outside the penalty area. The ball struck the crossbar, bounced down off Quiroz who was sprinting toward his own goal. It touched Australia's Aaron Cimitile, who was credited with the goal after his momentum had carried him over the line.
Gregory Giovaneli completed the scoring with four minutes remaining, taking a touch from a back-heeled flick from Fernando and drilling a high shot from a meter outside the penalty area past Estrada.