England posted 303-8 in Hobart, their highest one-day score in 20 matches, but could not keep a lid on their opponents as they launched a fearless chase.
First-time captain Steve Smith answered Ian Bell’s wonderful 141 with an unbeaten century of his own to continue his golden run of form, and the Australians claimed a three-wicket victory with one ball to spare.
While Morgan was right to point to signs of progress, he was also quick to highlight his team’s late first-innings stumble as the decisive phase of the game.
With 10 overs to go, England stood on the cusp of a formidable score at 244-2 but instead conspired to add just 59 more runs for the loss of six wickets.
“I think the template is right but executing it is going to be a challenge throughout the 100 overs,” said Morgan.
“I see us making huge steps, if you see where we were against Sri Lanka before Christmas and where we are now, I think the skill level we’re showing is much better.
“We were very dominant in the first 40 overs and set ourselves up for a commanding total. Somewhere around 340-plus would have been the score we were looking for but we didn’t manage to get there. It is frustrating but it’s still very early in the trip and we are making strides.
“One of the areas we’ll look at again is those last 10 overs against high-quality death bowling.”
Ian Bell’s wonderful form is a cause of significant satisfaction for England after choosing the 32-year-old ahead of Twenty20 blaster Alex Hales at the top of the order.
His fourth ODI century was of the very highest order and fittingly made him the country’s highest run-scorer in the format, usurping Paul Collingwood’s previous mark of 5,092.
“It is a privilege for us to have someone like Belly within our squad and we want to utilise his experience as much as possible,” Morgan added.
“He’s been awesome. Since we’ve touched down he’s really showed his huge experience and his class.
“He leads from the front in training and it’s really paid off which is great to see.”
Smith was quick to praise his bowlers as they limited England after a flying start.
“I think they came back really well there at the end,” he said. “I don’t think we started very well, we probably gave a few too many boundaries away early on and I thought they fought back really well.
“I think they only went for six an over the last 20 overs so that was an outstanding effort on that wicket.
“It was nice to get home in the end.”
Smith has now scored six centuries in his last nine matches in all formats and admits he is hopeful he can ride his good form into the World Cup.
“I’ll never forget this summer, that’s for sure,” he said. “I’ve really enjoyed it and while everything is going well I’ve just got to try to keep going. The game can turn pretty quickly on you so I’ve got to keep scoring runs.”