Australia is on course for its worst Games since Seoul in 1988, languishing in 24th place with just one gold by the end of day nine.
It is seen as all the more embarrassing given the country's much smaller neighbour New Zealand has three golds while traditional sporting arch-rival Britain has 16.
Kevan Gosper said Australian athletes had been hampered by a lack of public funds and government focus and said more money needed to be spent on top-level coaches and elite athletes.
"We've been down on the sort of financial support that we were accustomed to when compared with the financial support that's coming through from other countries, particularly here in Europe," he told ABC radio from London.
"The fact is you do need more money in international sports and preparing if you're going to compete with the world."
While sporting programmes received nearly Aus$325 million (US$343 million) in the 2010 budget, only Aus$52 million was earmarked for Olympic-focused high-performance programmes -- half what the Australian Olympic Committee wanted, ABC said.
"The money is the difference between silver and gold," said Gosper.
Australia has struggled to turn silver into gold in London, with 12 second places to just one gold-medal success.
New Zealand media wasted no time in mocking their trans-Tasman rival.
"Hey Aussies, we want to draw your disordered attention to a little line item on the Olympic Games gold medal table," Fairfax Media's stuff.co.nz website said in a comment piece.
"We're talking about the line that seems to have been censored in Australian newspapers. The one that puts New Zealand ahead of Australia, the self-styled world's greatest sporting nation."
Asked if the government should be spending more money on its athletes and coaching staff, Prime Minister Julia Gillard said: "I think there will be plenty of time after the Olympic Games is finished for people to reflect on the Games that was.
"At the moment I think our efforts need to be in putting our voice to the cheering and sending all of the messages through social media, all of our messages of support, to our athletes going about their work in London."
John Coates, head of the Australian Olympic Committee, told the ABC that Australia had been aiming for a top-five position in London and admitted he was "disappointed in the total picture at the moment".
"We had a dependency on swimming, but you do need a number of sports in which you can multi-medal," he said.
Recriminations and soul-searching over the poor performance began in earnest in Australia over the weekend, particularly about the much-vaunted swimming team's single gold in the pool.
Coates said more focus on sport in schools was the only way to find the next Ian Thorpe or Cathy Freeman.
"The British are making a big thing of that being one of the legacies they're looking towards, and they've been achieving that, a greater emphasis on sport in the schools," he said.
"We need that because we've got to make sure we have a talent pool."