"We have a big problem. If we want to be serious about it we have to recognise it is not something that can be solved only through telling individuals what they need to do," Prof Shaw says.
"It's complicated, but we need to find ways to make healthy food options the cheap options."
Possible approaches include taxation of junk food and subsidies of healthy food, he says.
The study shows that living in the most socially disadvantaged areas doubles the risk of diabetes.
"Education and income are major determinants of health," says Baker IDI Associate Professor Anna Peeters.
"The AusDiab data highlights the extent to which a person's environment makes a contribution to their wellbeing."
She says disadvantaged areas generally have higher concentrations of junk food outlets and fewer recreational opportunities.
The study shows obese people aged 60 and over are about twice as likely than their peers to have cognitive impairment and physical disability.
"One of the biggest contradictions is that people are living longer but they're being diagnosed with more disease. So their quality of life is being compromised," says Prof Shaw.
"As a community, we need to be prepared to take some tough decisions.
"It's not impossible. Look at what we've achieved with gun control, smoking and water restrictions."
- AAP