Pele has criticised the Brazilian Olympic team because he feels it is not ready for the 2012 event.
He says evidence of this is Brazil's 2-0 weekend loss to Mexico.
Pele also lambasted starlet Neymar for overly hugging the left wing.
"I think it's good this (defeat) happened as it does away with the feeling that this is a marvellous team, that it's doing fine," said Pele of the loss to the Mexicans in Texas which came on the heels of a much more impressive 4-1 win over United States.
Coach Mano Menezes hopes to lead the Brazilians to their first Olympic title in London in August but Pele says they have some way to go.
"It is a good team, with good players but not yet ready to overcome difficulties when they arise," said Pele, who believes Neymar has difficulty playing against a European or Latin American defender - more so than against Brazilian league rivals.
"He stays stuck out there on the left but that doesn't just happen in the national side but also with Santos," Pele charged, urging Neymar to move inside and become more involved in dictating the play.
Football Federation Australia (FFA) chief David Gallop said it would not be a "disaster" if the Socceroos do not qualify for the FIFA 2014 World Cup.