"Australia's current goal ... and the absence of a national zero emissions target, is out of step with its states, its trading partners, and other comparable nations," he told the Better Futures Forum on Tuesday.
Without more action, Australia risked finding itself on the wrong side of carbon tariffs imposed by trading partners.
"Ethically, the toll of inaction on climate is incalculable," Mr Ban said.
Former UN head Ban Ki-Moon attacks Scott Morrison over climate policy
"Economically, failing to set ambitious, credible emissions targets in line with the rest of the world poses a huge threat to Australia's future prosperity and international standing."
NSW Environment Minister Matt Kean warned the federal government should get with the program or get out of the way.
"Complaining it is too hard is not a solution. Saying it is up to others to come up with a plan is a cop-out," the Liberal MP told the forum.
"The community expects our leaders to get on with it or get out of the way."
The federal coalition is under renewed pressure to act after the UN's latest climate report card showed a world on track to warm by 1.5C by early next decade.
Prime Minister Scott Morrison continues to tout a "technology not taxes" approach while flagging Australia will update its emissions outlook at the UN's climate conference in Glasgow scheduled to start on October 31.
Current projections show Australia is on track for 29 per cent emissions reduction by 2030.
Meanwhile, Nationals leader and Deputy Prime Minister Barnaby Joyce has demanded to see a plan spelling out the costs of taking action on climate change.
The UN's Intergovernmental Panel on Climate Change earlier this month showed Australia's land areas had warmed 1.4C since 1910.
Warming would only worsen fires, floods, droughts, coral bleaching, extreme temperatures, marine heatwaves, coral bleaching and accelerating sea level rise.
The planet could be up to 5.7C hotter by the end of the century under a worse-case scenario modelled by the IPCC.