The Socceroos knew they needed a drastically improved performance from that which they served up against Oman in their opening Group A game on Sunday.

But after a bright start Australia once again tired as the game wore on, and though Mark Viduka cancelled out Nashat Akram's strike, further goals from Hawar Mulla Mohammed and Karrar Jassim Mohammed condemned them to a deserved defeat.

Australia made one change to the side that drew 1-1 with Oman with Brett Holman coming in for Mile Sterjovski.

The Socceroos knew a positive start was vital and they look spirited in the opening stages, carving out their first chance in the second minute when Harry Kewell whipped in a perfect cross that found Mark Bresciano unmarked in the box, however his shot went wide.

Six minutes later Iraq had a good chance to take the lead when Younis Mahmoud turned Brett Emerton in the box but flashed his effort over the bar.

The lively opening continued as Bresciano saw his powerful free-kick palmed away by Noor Sabri soon after.

Iraq responded with a well-stuck free-kick of their own in the 15th minute but Mark Schwarzer had Hawar Mulla Mohammed's drive covered.

And it was perhaps no surprise that it was a free-kick that produced the first goal eight minutes later.

Nashat Akram - a potential target for Sunderland - found the net from 25-yards, his dipping effort eluding Schwarzer, who had been distracted by Saleh Sadir.

Viduka flashed an effort just wide of the post on the half-hour mark as Australia looked to respond, but they had only one more effort before the break when Viduka headed down to Bresciano but the Palermo man was flagged offside.

Socceroos coach Graham Arnold brought on Sunday's hero Tim Cahill at the start of the second half for Holman.

Australia needed to make an immediate impact if they were to get their qualification campaign back on track and they did just that.

Two minutes into the second period Emerton found space down the right and crossed into the box where Viduka rose highest to head home his first goal in the tournament and his ninth in his international career.

Haitham Kadhim warmed the hands of Schwarzer with a shot from distance soon after and just as Australia appeared to have found their rhythm Iraq struck again.

On the hour mark Hawar Mulla Mohammed was put clean through on goal and the midfielder made no mistake, stroking the ball into the back of the net.

Arnold brought on Archie Thompson for Jason Culina in the 63rd minute before adding John Aloisi to the fray as Australia opted to go for all-out attack.

But it was Iraq who continued to look the most likely to score as the dangerous Hawar Mulla Mohammed lifted a shot towards goal that Schwarzer just managed to tip onto the bar.

And Iraq rounded off the victory in the 86th minute when Mahdi Karim broke into the box and flashed a shot towards goal that Schwarzer could only get a hand to and Karrar Jassim Mohammed swept home the loose ball.

Australia face Thailand in their final game in Group A.

To check out images from the match click here.