A Health economist has told a Sydney forum Australia has underinvested in preventative health programs to help curb the rise in diabetes.

Obesity will make diabetes the leading cause of death and disease in 10 years and put a heavy burden on the Australian healthcare sector, a health economist has told a Sydney forum.

Henry Cutler, head of health economics at KPMG, said official figures put the number of Australians diagnosed with diabetes at approximately 900,000 - a severely under reported figure.

"We can expect the actual prevalence of diabetes to be around 1.6 million, most of that is the cause of type 2 diabetes," Dr Cutler told the Diabetes and Sustainable Population Forum in Sydney yesterday.

"In 10 years’ time diabetes will be the leading cause of mortality and morbidity in Australia.

"A large proportion of diabetes is due to obesity, with five million people now in Australia being obese, which is nearly one quarter of all Australians."

Cutler said these alarming figures would result in huge treatment costs.

"The cost of treatment for diabetes will increase from $2.8 billion to $8.6 billion between 2012 and 2033," he said.

"Of that, type 2 will account for $5.6 billion and obesity will drive about 27 per cent of that.

"Diabetes is predicted to have the largest percentage in health care expenditure compared to all conditions in the next 10 years."

He said governments needed to act fast in implementing preventative measures.

"We're far behind in terms of allocating funding for preventative health programs," he said.

"We should be investing more money in innovative way to prevent obesity."

NSW Health Minister Jillian Skinner, who also spoke at the forum, said the state was working to both prevent the disease and better manage those who already had diabetes.

"The best health policy government can deliver is to keep people well and out of hospital," Skinner said.

"That has to be our number one goal."

National Diabetes Week runs from 8-14 July.

AAP