The findings came from an international health survey which also revealed that Australians were among the world's biggest drinkers, coming in just behind their British cousins.
The survey by health insurer BUPA showed that while 64 per cent of Australians said they were in relatively good shape, there were some worrying trends.
A measurement of waistlines among the 13,000 people from 12 countries who took part in the survey showed Australians were world leaders in self-deception when it came to being fat.
While one-third of the 1200 Australians surveyed admitted being too fat, BMI (body mass index) measurements revealed their perception was far from reality with 60 per cent actually overweight.
The BMI results put Australia in equal third place with Britain, just behind the US and Saudi Arabia where nearly two-thirds of people were overweight.
While more than half of the Australians wanted to shift those extra kilos, 44 per cent spent less than two hours a week working out.
Three-quarters said they drank alcohol - second only to Britain, where 84 per cent enjoyed a tipple - and just over a quarter ate the recommended five serves of fruit and vegetables.
Bert Boffa, a practising GP and head of BUPA's medical services, said Australians might not realise they needed to lose weight because they had become used to seeing more overweight people.
"If you look at pictures of young children on the beach 30 years ago, they were stick figures and now you go to the beach and kids aren't stick figures any more," Dr Boffa told AAP.
"It's concerning because at the same time we are trying to get messages across to Australians about reducing weight and increasing exercise.
"But one of the barriers now is that they don't realise they are starting behind the starting blocks.
"Some people out there are saying, 'I'm not overweight, so I don't need to heed this advice'."