Sportal.co.nz 14.Jun.2012Getty Images
Wales - who won the 2012 Six Nations and made the semi-finals of the 2011 Rugby World Cup - were not at their best in the series opener in Brisbane last week.
Trailing 20-6 at one stage, Wales were able to reduce the margin to one point before eventually slumping to a 27-19 loss to Australia at Suncorp Stadium.
"We certainly recognise that Wales will come with improvement in them and we need to do likewise," McGahan told reporters in Melbourne on Wednesday.
"They (Wales) are an ambitious side, they are a very good side. They are well coached, they are well balanced and they have got a great age profile. They are certainly in a great place.
"I think you'll see great improvements (on Saturday) out of both groups. We need to make sure that we improve on what we have done."
Will Genia was the star of the show last week, scoring a superb solo try and then setting up Pat McCabe for the match winner.
And McGahan believes Wales will put more attention into shutting down the 'terrific' Genia and his partner in crime Berrick Barnes in order to level the three-Test series.
"I think Wales ... their first reaction will be to really shut down our key playmakers at nine (Genia) and 10 (Barnes)," he said.
"I think you'll see a renewed focus in that area, I think you'll see a real blitz defence and I think they'll be coming off the line exceptionally hard around the ruck.
"They'll be trying to control our nine and 10 and make sure that their time on the ball and their ability to get themselves into the game will be shortened."
After playing in gale force winds and heavy rain in Newcastle on Tuesday last week - a match the Wallabies lost 9-6 to Scotland - Saturday's match cannot be affected by the weather with the roof to be shut at Etihad Stadium.
And McGahan thinks that will only improve the spectacle for the big crowd expected at Docklands.
"The number one thing you can count on is that is going to be a nice, dry environment. It certainly can be very humid underneath the roof but the Aussie Rules players do it every week so I don't think it is going to be a great challenge for anyone," he said.
"The conditions will be dry, it will be a bit humid (and) noise value will be great which will certainly add to the spectacle.
"We are looking for improvement in both sides so from that point of view, (it will be a) great game, a great environment and a dry track. I think it will add up to a great experience for everyone."