Sports-mad Australia has traditionally punched above its weight at the Olympics but 10th place on the medals' table in Rio earlier this year continued a decline from fourth in Sydney in 2000 and Athens four years later.
John Wylie, chairman of the Australian Sports Commission chairman, said on Monday the country was at a "moment of truth" and called on the government to set up an online lottery by the end of next year to benefit sport and the arts.
The call was supported by Mark Arbib, a former sports minister recently appointed Athletics Australia chief, and Swimming Australia boss John Bertrand.
Australian Olympic Committee President John Coates also gave enthusiastic backing to the idea.
"We are 100 percent supportive of the lottery proposal," he said.
"Olympic sport is in desperate need of funding. We are being out-funded by other countries, particularly Britain and Germany. I would give the lottery wholehearted support and I hope it gets up."
The Australian Sports Commission provides a majority of the funding for most Olympic sports but has seen its government grant decline over the last five years.
Britain, which has traditionally been a close rival of Australia at the Summer Games, has conversely benefited from a huge increase in funding for elite sport via its national lottery and finished second on the medals' table in Rio.
"We are on a burning deck in terms of our international performance," Wylie told The Australian newspaper.
"There is no better evidence of that than what has been happening at the Olympic Games.
"If we are going to remain competitive internationally, if we are going to have a healthy and active society, we need to invest significantly more in the system."
($1 = 1.3387 Australian dollars)
(Editing by Peter Rutherford)
