James Allison has hailed Ferrari's return to winning form but vowed to hit back at his former employer.
The highly respected engineer ended his stint as Ferrari's technical director last year amid tragedy and acrimony, switching to Mercedes for 2017 to run the title-winning UK-based team's technical division.
With Ferrari now relying on his successor Mattia Binotto and a team of mainly young Italian engineers, Allison had to watch the red outfit return to winning form in Australia from the Mercedes pitwall.
"We have to pay tribute to Ferrari who have a very quick car," Allison told Italy's La Gazzetta dello Sport. "In Australia we were not able to keep up.
"If it was not clear after qualifying, it was understood after the race that this will be a season played out over small differences."
However, Allison is confident that he can help Mercedes to regain their dominant place at the top of the pecking order.
"We don't panic," said the Briton. "It was only the first race in a long season and we still put two cars on the podium. So we are determined to turn those little differences in our favour at the next opportunity."
Asked how Ferrari managed to put their nose in front with Sebastian Vettel in Melbourne, Allison answered: "They put us under pressure right from the start and that's how we lost."
There was also the crucial timing of Lewis Hamilton's pitstop, with Allison admitting: "We thought the tyres would not last, and we feared a change of strategy by Seb, so we took the risk of making a pitstop and putting him behind.
"Ferrari took advantage of its opportunity very well."
The championship continues with the Chinese Grand Prix next weekend.
