The Black Sticks Men fell short 3-2 against Australia last night at the Sultan Azlan Shah Tournament in Malaysia.
Last night's winner-takes-all match means that Australia progress to the final to face hosts Malaysia and the Black Sticks will play Korea for bronze.
Australia needed a draw to make the final and take Malaysia along with them while a Kiwi win would have meant either Australia or Malaysia would be out of the equation.
"It was disappointing not to come away with a win tonight. We hung in there in the second half, but conceding three goals put us on the back foot and although we rallied together it was always going to be difficult to come back," says head coach Colin Batch.
"I think our set piece play has been very good, we just need more penalty corners, tonight we scored one from one.
"We successfully defended seven Australian penalty corners - we had done our homework well and that paid off."
Australia nearly went ahead from their third penalty corner in the 15th minute, but Black Stick goalkeeper Hamish McGregor, who had a great first half, cleared the ball quickly.
Having defended well, New Zealand's first goal came from a nice break away against the run of play in the 27th minute, when Isaac Staples weaved through defenders on the left flank and found Jacob Smith who tapped it in.
New Zealand twice came close to increasing their lead, but Australia held on and at halftime New Zealand led 1-0.
In the 38th minute Australia hit their straps bagging three within four minutes when Jacob Whetton scored two field goals and Matt Gohdes tapped in a third.
With the rain pouring down, match officials suspended play in the 50th minute and when it resumed it was Black Sticks Cory Bennett in the 56th minute who scored from a penalty corner. The Black Sticks rallied to try and equalise, but it was not to be.
Australia 3 (Jacob Whetton x2, Daniel Mirecki)
New Zealand 2 (Jacob Smith, Cory Bennett).