Fewer than 20 per cent of five to 17-year-old Australians do the minimum 60 minutes of moderate daily exercise they need.
Australian children are near the bottom of the class for overall physical activity, according to a scorecard that compares 15 countries.
Top marks go to children in New Zealand and Mozambique, who score a B.
Scottish children fail with an F and Australian children are second last with a D minus.
But they could do better with a little help from the government, their parents and teachers.
"It will take a co-ordinated effort. Changes are needed throughout children's everyday life to make this grade jump up," says Dr Natasha Schranz, who managed the Australian leg of the rankings to be announced in Canada on Wednesday.
It's not enough that Australia does well for organised sport and comes top of the class for its facilities and environment, she says.
Fewer than 20 per cent of five to 17 year olds accumulate the minimum 60 minutes of moderate exercise they need every day.
"If most children did that, we would have an A plus."
It's achievable, she says. The 60 minutes does not have to be all at once.
But the average 2014 Australian child comes stone last in a race against their 1975 peers.
Children need more than sport two or three times a week, Dr Schranz says.
"It's no good if there is a well-designed playground down the road if a parent does not think it is safe for a child to walk there and use it.
"The underdeveloped countries are racing ahead because children have to walk and do chores around the house."
The results are worrying, says Associate Professor Trevor Shilton of the Heart Foundation.
"Australian children are getting too much screen time.
"We are raising a generation of couch potatoes.
"New Zealand tends to have better co-ordinated governmental leadership. Their sports sector and their health sector work together.
"They are doing better than us in almost every measure."
A small minority of Australian children walk or ride to school, according to the data compiled by 24 academics at nine research institutes and universities across the country.
"They sit in cars getting to school. They sit at school. They sit getting home from school. And then they sit in front of screens and while doing homework," says Prof Shilton.
"If you send a child outside, they play. They will find a stick or a snail or a pet or a friend.
"Parents should understand that what they say and do matters.
"Be active with your children. Have some rules about it too."
The complete report: