A try from Boyd Cordner was the difference between the two teams in the showpiece event in Brisbane on Saturday.
Smith, who himself has coached England and Great Britain, was full of praise for the English performance but did feel the narrow scoreline flattered Wayne Bennett's side.
He told BBC Radio 5 live's Sportsweek: "England tried very, very hard. They made a real dig of it and represented the country very well.
"They showed a good account of themselves and the progress that has been made in the national team - it was very encouraging.
"At the same time, while they were very good, the Australians at the moment are a lot better. The score flattered England to some degree."