Ireland, chasing Australia's 179-5, were all out for 137 in the 19th over to put Australia level on points with New Zealand, who have a game in hand, at the top of Group 1.
Ireland had outside hopes of reaching the semi-finals before the match but they were blown away initially by the pace and inswing of Mitchell Starc and then by the pressure of chasing 180 to win.
They slumped to 25-5 and handed the World Cup hosts a comfortable win despite a superb unbeaten 71 from Lorcan Tucker.
Australia captain Aaron Finch, who won the man of the match award for his 63 runs, said scoring had not been straightforward.
"It wasn't the easiest wicket, it was a lot slower than what we expected.
"They changed their pace really well and bowled a lot of cutters early in the innings.
"It was hard to get a rhythm and we did well to get 179."
Earlier Finch had stormed back into form with his 44-ball knock which contained five fours and three sixes, answering critics who had called for him to be dropped after a poor run with the bat.
Finch denied he had been affected by all the chatter. "Nah, not feeling the pressure at all to be honest," the captain said.
"The support from the change room and support staff has been incredible. T20 is a high risk-game, sometimes it comes off, sometimes it doesn't."
He stayed patient, playing the anchor role as Australia lost their first three wickets to tight Irish bowling.
Ireland 'making progress'
His circumspect approach paid off and Finch profited after the Ireland attack began to falter under the pressure of an onslaught from Marcus Stoinis, who blasted 35 off 25 balls.
Ireland started their run chase briskly but suffered a big blow when captain Andy Balbirnie was bowled by Pat Cummins for six off the last ball of the second over.
He was followed almost immediately by the dangerous Paul Stirling, who was caught at mid-off by Cummins from part-time spinner Glenn Maxwell for 11.
Maxwell then had Harry Tector caught at square leg with Ireland on 24 and the game was as good as over one run later when Starc clean-bowled Curtis Campher for a duck.
Starc was bowling with real pace and he struck again with another beautiful inswinger to account for George Dockrell, leaving Ireland reeling at 25-5.
Tucker and Gareth Delany led a slight recovery until Delany skied to Maxwell trying to belt Stoinis for six.
Tucker, who had come in at number three, played a lone hand, amassing his 71 from 48 deliveries until he ran out of partners.
"We're making progress to keep up with these big teams - looking at the scoreboard we thought it wasn't against us," captain Balbirnie said.
"Again the wickets column was a problem and who knows if someone had stayed with Tucker."
