Although the defending champions and top-ranked All Blacks remain strong favourites with bookmakers, Waugh's provocative assessment blows Australian coach Michael Cheika's claims for underdog status out of the water.
Waugh's comments are also sure to stir the All Blacks into life, with coach Steve Hansen certain to use the big talk coming out of Australia as motivational fodder for the Rugby World Cup and Bledisloe Cup holders.
Waugh is hugely impressed by Cheika's ability to stamp his authority on the Wallabies - and restore harmony after Ewen McKenzie's acrimonious departure - just 11 months and 12 tests into his national coaching reign.
"It's probably everything that Cheika brings to the team. Culturally, they look like a very tight-knit group," Waugh said.
"I've had a little bit to do with them on the inside but certainly watching them from the outside you can just see that they're a very happy group, very confident in what they're doing.
"They keep talking about their identity, so they certainly know their identity and that's such a big piece in being successful in world cups."
Waugh stopped short of declaring Australia's dynamic backrow the best in the world but said it had been integral to the Wallabies' resurgence after they slipped to No6 in the world earlier this year, the lowest ranking in their history.
"The backrow has been outstanding. But the backrow is playing behind a tight five that's been most dominant," he said.
"So the forwards are setting the platform and [first five-eighth] Bernard Foley had the luxury of playing behind a dominant forward pack on Saturday afternoon.
"That allows us to play our way and gives the backs so much freedom to play.
"But, for me, the forwards have been very impressive.
"In particular, the scrum and then what [loose trio Michael] Hooper, [David] Pocock and [Scott] Fardy bring to the breakdown, it's a quite comprehensive forward pack."
Waugh, though, knows the tables can quickly turn and says it's imperative the Wallabies topple Wales to avoid a treacherous knockout draw.
"No team has ever won the world cup after losing a pool match so there's all these little things," he said.
"It's not impossible if they lose this, but it's a lot harder if you have to play South Africa in the quarter-finals and then probably the All Blacks in the semis."
Welsh will need wizardry to overcome Aussie hoodoo
The game seemed done. It was December 2012 at the Millennium Stadium and Wales led 12-9 with fewer than four minutes remaining and with a penalty to kick to the corner. There was surely no escape. This was it. Wales were going to beat Australia to end a run of seven successive defeats.
Even when the lineout drive was stymied and the ball held up, giving Australia a scrum in their own 22, the mood did not sour. Yes, it was not ideal that possession had been surrendered, but not many teams score from near their own line to win a test match.
All Wales had to do was ensure that their defensive line speed was quick enough to deny the Wallabies any space in which to work.
It did not happen.
In the blink of an eye, Australia were off and attacking. Even though Wales did momentarily regain possession inside their own 22, with Rhys Priestland's long clearance not finding touch, the rest was so inevitable that it was painful. A galloping run from replacement flanker Dave Dennis down the right, a pass inside to Kurtley Beale and a try scored with just 26 seconds remaining.
Left motionless on the turf was Leigh Halfpenny with a neck injury after his tackle on Dennis. It was seven minutes before the conversion could be taken by, of all people, lock Nathan Sharpe, with his last act in test rugby. He missed, of course, so that Australia won 14-12.
Before that match, Wales lay seventh in the world rankings.
By the Monday, when the draw for this 2015 tournament was made, they were down to ninth in the third tier of seeds, with Australia ranked third and in tier one and England ranked fifth in tier two.
Thus, we had the farcical situation of England, Wales and Australia being tossed together in the same shark-infested pool.
It was some descent by Wales, who, of course, had been Grand Slam winners earlier that year and had been fifth in the rankings.
But they then lost seven tests on the trot, three on their (northern) summer tour to, you guessed it, Australia, and all four autumn tests, to Argentina, Samoa, New Zealand and, finally, Australia.
There has been much trepidation and some guilt since then, until last weekend, of course, when the light of survival from Pool A suddenly shone just as a Stygian gloom enveloped England.
It now looks like it was a grand plan to eject the hosts, who just happen to be the rather bitter enemy. But as Wales prepare to face Australia at Twickenham tomorrow, that Beale-inflicted loss should really read as just another mark in the sorry ledger that has brought 10 consecutive defeats by the Wallabies since Wales won in Cardiff in 2008. It is some litany, even compared to 26 successive defeats by New Zealand.
Wales have never lost to Australia at Twickenham. The trouble is, though, that Australia did play rather well there last weekend. Expect the same tomorrow.
- Telegraph Group Ltd
