Wallabies legend John Eales believes Australia are capable of completing a grand slam sweep of the UK and Ireland but has warned losing Saturday's opener against England could spell disaster.

Despite the Wallabies suffering their seventh straight loss to New Zealand in Tokyo last weekend, the World Cup-winning former Test captain believes the current Australian team has the potential to emulate the 1984 squad that completed a grand slam of victories over England, Ireland, Scotland and Wales.

"I'm an optimist, I always was when I played and believed we could win every game that we played and I still believe the Wallabies can win every game that they play," said Eales, who captained Australia a record 55 times.

"If we can do really well on this tour I think we're in great shape actually and much better than what most people think.

"Of course it's not going to be easy ... England this week (on Saturday), they're not at full strength, but England at Twickenham are always hard, and I think Wales and Ireland in particular are going to be big challenges for us."

Despite the Wallabies only winning one of their past seven Test matches - September's 21-6 Tri Nations win over South Africa in Brisbane - Eales believe Robbie Deans' side could not have got a much better hit-out for the grand slam tour.

"The last seven Tests they've played have been against New Zealand and South Africa and they are undisputed the two best teams in the world - the Springboks by some measure," Eales said.

"The All Blacks couldn't beat the Springboks but we did so it hasn't been a total disappointment this year.

"The exciting thing is we've seen the top marker, we've seen how we can play when we were at our best against the Springboks in Brisbane.

"We haven't hit that again yet, but knowing that we can hit it is the exciting thing."

Eales believed the key for the Wallabies was setting the tone with a strong win at Twickenham on Saturday but he feared a loss could plunge Australia's confidence to dangerous levels and make for a long tour.

"It's so important," Eales said.

"It would be a big, big dampener, even more than losing (in Tokyo) last week.

"It would be a big dampener not to win this week so there is a fair bit of pressure on them."