England lost by 166 runs to the Prime Minister's XI, an invitational side, which contained only a few test-strength players.
Chasing a score of 347-5 from 50 overs England managed just 181 runs before a capacity crowd of 15,000 at the Manuka Oval in Canberra.
Phil Jaques lead the scoring for the home side with 112 runs after England captain Andrew Flintoff sent them into bat after winning the toss.
Jaques' century contained a string of lofted drives and pulls and ensured his place as a standby in the Ashes squad in case regular openers Justin Langer and Matthew Hayden need to be replaced.
"It was surprising that we won that easily, but everyone played well. It was a good batting wicket," fast bowler Shaun Tait, who took three wickets for 21 runs, said.
Tait is another of the invitational side's players who is being considered for an Ashes spot.
Phil Jaques scored a century for
the President's XI
Andrew Strauss was the one bright spot in the England batting order with a score of 67.
England will also be pleased that Flintoff bowled a full 10 overs as he continued his recovery after ankle surgery in July. He finished with figures of 1-55, taking the wicket with his 15th delivery.
The captain sought to put a brave face on the defeat.
"We're not going to get despondent over this, we're traditionally slow starters," Flintoff said. "They bowled really well."
"We've had a defeat today but it doesn't turn us into a bad side. We've still got talented players and we've got to express ourselves in the weeks to come."
England has two more matches, against New South Wales and South Australia, ahead of the first tests in Brisbane on November 23.
England regained the Ashes last year after 16 years by beating Australia 2-1 over the series.