More than 80 per cent of children fail to get one hour of exercise each day, ranking them behind Britain and Finland as among the least active in the world.
A landmark survey of 15,000 people, which compared the physical activity of children from 15 countries, found the majority of five to 17 year-old Australians do not meet exercise guidelines and more than 70 per cent spend more than two hours a day watching an electronic screen.
Lead author and research associate the University of South Australia, Natasha Schranz, said the results showed parents were falling into the ''trap'' that organised sport is enough to keep children healthy.
''It's alarming that a nation committed to sport has fallen so far behind in incidental activity,'' Dr Schranz said.
''We are just shutting it out. We need to do more active transport, reduce sitting and television time and incorporate active play into everyday life.''
The Active Healthy Kids Australia report card, which combined data from the Bureau of Statistics and the National Secondary Student's Diet and Activity survey, found one in five children walk or cycle to school and only 19 per cent of five to 17-year-olds meet the guidelines of 60 minutes of exercise each day.
For the broader category of young people aged two to 18, 25 per cent met minimum exercise guidelines.
Almost three-quarters of children aged two to four spend more than one hour in front of a television or computer daily and about 15 per cent have a screen in their bedroom. But despite this, the average child takes 9140 steps daily and 64 per cent participate in organised sport.
Trevor Shilton, the Heart Foundation's physical activity spokesman, said it was ''shocking'' Australia is not faring well against countries such as New Zealand, Mexico and Britain, where almost half of all children meet daily exercise recommendations.
''What we're facing is a potential future health crisis where heart disease, diabetes and obesity rates will rise. This is a wake-up call and there is no sign this will get any better.''
He said building walking and cycling infrastructure and introducing 2½ hours of mandatory physical education in schools each week would dramatically improve activity rates.
''We're raising a generation of couch potatoes,'' Associate Professor Shilton said. ''Far too many kids are being driven to school and spend most of their time sitting when they get there. There is nothing inherent in children that makes them sedentary, which makes this very worrisome.''
Peter McCue said his three children are among the minority who get more than two hours of exercise a day.
''One of the considerations of what school they went to was that it was in walking distance,'' he says. ''Keeping them active means they make the choices to do more exercise on the weekends. It has become a part of their lives.''
Mr McCue's children Mia, 12 and Jenna, 10, cycle about a kilometre to their Bondi Beach school each day and his oldest, Oliver, 15, walks rather than takes the bus to Rose Bay Secondary College.
Television is banned before school and during meals and the family limits screens in their bedrooms.
''These rules are a great way to incorporate movement into their lives. Hopefully these are choices they'll continue to make as they get older,'' Mr McCue says.