The shots just would not fall for the Aussies all game and Serbia took a lot of lessons out of their group stage meeting, scouting their opposition very well by containing Andrew Bogut at the top of the key while Milos Teodosic was relentless in his attack on the Australian back court.
A nervous start from the Aussies saw them trail 0-8 inside the first two minutes but Patty Mills (13 points, two assists) broke the ice with a three-pointer from the corner.
That triple would be one of just four that Australia made, shooting 13% from beyond the arc and just 33% from the field overall.
Their defensive pressure kept them in the contest early with Andrew Bogut (four points, two blocks) tallying two straight rejections and Joe Ingles (12 points, seven rebounds) harassing the Serbians at the perimeter while a 5-0 run to start the second term reduced the double-digit margin.
Ryan Broekhoff (six points, four assists) provided a spark off the bench but a bevy of turnovers plagued his team while Teodosic continued to be the thorn in Australia's side, masterfully working his way through the opposition defence to be the first player to notch double-figures.
He helped Serbia respond with a 16-4 run heading into the main break, opening a 21-point lead and forcing coach Andrej Lemanis to trial several different line-ups.
Australia were able to get to the free-throw line for the first time early in the third quarter but they struggled to find a flow to their offence with only Brock Motum (13 points) able to take the lid off the rim but when Stefan Markovic nailed a couple of three-pointers, the match was sealed.
The full box score can be found here.
The good news for Australia is that their tournament is far from over, with the chance to play Spain for a bronze medal at 12.30am AEST Monday morning.
Spain are the number two ranked team in the world but the resolve of this Australian side has been proven and they will be intent on coming away with the men's first Olympic medal in two days time.
Click here for the full FIBA schedule.