Holders now face uncertain future in the competition.
Australia overcame arch-rivals England by only two runs in their Super Sixes contest at the ICC Women’s World Cup in Mumbai.
The defending champions struck first when Rachel Haynes was caught and bowled by Anya Shrubsole for two.
Shrubsole grabbed her second wicket in the same over, clean bowling Jess Cameron for a duck.
21-year-old Shrubsole’s third wicket was vital.
Meg Lanning’s dismissal left Australia 27-4.
The Aussies lost another before Lisa Sthalekar and Sarah Coyte started the fight-back.
The pair scored 86 runs before Australia were all out for just 147.
England’s chase didn’t start well.
Charlotte Edwards became the leading run scorer in women’s ODI history recently.
But the England captain couldn’t add to her tally, out for eight.
The wickets continued to tumble and England soon found themselves 39-6 when 17-year-old Holly Ferling took the middle stump of Jenny Gunn for a duck.
Shrubsole put in a performance with the bat as well, moving England to within 12 runs of victory with 31 balls remaining.
Erin Osborne struck the killer blow as she dismissed Holly Colvin to seal a dramatic two run win for the Australians.
Australia have not been beaten by England in a World Cup match since 1993.
England’s hopes of defending their title now hang in the balance.