Australia captain Ricky Ponting admitted his team had been outplayed again by England at Trent Bridge.
Ponting blamed his side's poor first innings display
"England played a very good Test and thoroughly deserved to win. We've got a lot of work to do, with both the ball and bat we have to improve," he said.
"We're staying in the games and fighting really hard but we're always coming from behind and we've got to rectify that at The Oval.
"Losing a Test is hard. We can't afford to give a side like England a start."
The latest epic finish saw a similar scenario to the famous Headingley Test of 1981, when Australia were left needing 130 but were bowled out for 111.
"We always had our backs against the wall but we had a little bit of a chance. Little totals like that can sometimes be hard to chase in this country, as we've found out a few times over the years," Ponting observed.
The skipper believes England's aggressive approach to scoring the 129 required was the correct course of action.
"They had to get out there and play their shots and back themselves, and they did that," he said.
"Full credit to England for the way they played, but to our guys, the way they stuck it out over the last couple of days was terrific."
Australia's two frontline bowlers, Shane Warne and Brett Lee, came close to orchestrating a famous victory for their side.
Lee claimed three wickets with some rapid deliveries and Warne's guile resulted in 4-31.
Warne caused all manner of panic with his vast repertoire of tricks
"I knew that Shane would do it, he loves that sort of occasion, and Brett bowled his heart out all day and got us some crucial breakthroughs," Ponting said.
"We've come up a couple of wickets short but I'm very proud with the way the guys have stuck at it.
"It's hard to accept, but we've got to improve the way we're playing. If we can play the way we have done in the last two days at the start of the next Test hopefully there will be a different result."
Looking ahead to the final match at The Oval, beginning on 8 September, Ponting was optimistic that his key seamer Glenn McGrath would be able to return after injury.
"It will be nice to get McGrath back into the side, hopefully his elbow comes up all right," he said.
"We've just got to have a look at how the way the guys have pulled up after this game, we've got a tour game at Essex and we'll monitor all the guys through that one."