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Published 13:19 20 Jun 2018 BST
Updated 00:34 21 Jun 2018 BST
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According to the former Liverpool defender, England's 3-5-2 formation doesn't suit Sterling because he effectively played as another striker alongside Kane, and there were two players who like to drift into the same spaces as him - Dele Alli and Jesse Lingard.
"At the moment, England are effectively playing with three number 10s, even though none of them are what you would describe as the classic versions of this position," Carragher wrote in his column for The Telegraph.
"All rely on their movement and pace rather than ability to open up defences with a cute pass. It makes Sterling's inclusion slightly illogical. Lingard and Alli are playing the roles of Kevin De Bruyne and David Silva at Manchester City - what is now described as a 'false 8' - but with different skill sets.
"It is a central midfield position but more attacking than conventional. For City, Sterling has been most effective starting out wide and drifting in within Pep Guardiola's 4-3-3 - he is more comfortable picking up possession when facing goal rather than with the defender at his back.
"There is no doubt he is capable of doing a job, but if there are long periods when Sterling is a striker surely it makes more sense to use Rashford or Jamie Vardy?"
Carragher has a point. England would possibly benefit from starting a natural striker alongside Kane - someone such as Rashford or Vardy - instead of sticking with three players who like to take-up the same positions. Southgate could alter his formation and play Sterling is a position that better suits his skill set, but it appears the England boss is wedded to the current set-up.
The former Liverpool defender also wrote about the need to taper expectations after on Monday's match. Yes, England played well in the first-half, deserved to beat the Tunisians and there were positive signs for the team, but it wasn't the complete performance some have suggested.
"Naturally, England looked good at that stage, but while I have no wish to puncture the mood of encouragement we have to acknowledge the flow of the match was dictated by Tunisia's tactics. The game changed when Tunisia changed.
"When Tunisia got it right, England struggled to create chances due to lack of creativity in midfield - a worry we recognised before the tournament. They could not get behind their defence once it sat back.
"This is what they will have to overcome against Panama, although the first-half performance bodes well when England meet sides in the knockout stage similarly willing to leave spaces at the back."
Carragher said that England should make three changes for Sunday's game. He wants Rashford to replace Sterling, Reuben Loftus-Cheek to replace Alli, who is carrying an injury, and Danny Rose to start ahead of Ashley Young.
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