The countdown to London 2012 is being accompanied by the most unlikely of stories: that Australia has thrown in the towel.

After Great Britain surged past Australia in the medals table at the Beijing Games last year, the most almighty of Down Under comebacks was widely expected. However, Australian Olympic sports are facing a crisis of funding that has elicited dire warnings that gold medals could become a thing of the past.

The news has been greeted with interest and suspicion this week at The Belfry, in Sutton Coldfield, West Midlands, where the leading coaches in British Olympic sport have gathered for their annual conference.

Some believe that the Australians are bluffing, some just do not believe it at all, but united is the joy that Australian sport has name-checked Britain as the model on which to launch a comeback.

This year, the Australian Olympic Committee responded to its disappointing 2008 Games with a finely researched document, the High Performance Plan (HPP), which recommended an annual funding increase of A$108 million (about £60 million). The document isolated nine areas in elite performance where policy changes were recommended and in each of these they identified the international benchmark that they should seek to emulate. In seven of the nine categories, Britain was the model example.

However, the fear in Australia is not that they will be denied the funding increase, but that funding may be savagely cut. Rather than follow the recommendations of the HPP, the Australian Government has instead commissioned David Crawford, a businessman and lawyer, to deliver its own report and it is believed that it recommends a new approach, in which sport becomes part of the Australian Department of Health and participation is funded rather than elite performance.

Matt Favier, a former athlete who is an alumni of the Australian Institute of Sport and now a department head at UK Sport, said yesterday: “If the version of the report that I’ve seen is realised, Australia will find it incredibly difficult to be as competitive as they have previously. Other nations are outspending and outmanoeuvring Australia.”

Favier’s comments follow those of Ric Charlesworth, the celebrated Australian hockey coach, who was quoted at the weekend, as saying: “If we keep our eye off the ball, there will be an Olympic future where we won’t win any gold medals.”

No one here at The Belfry, though, will believe it until they see it. As Peter Keen, the UK Sport performance director, said: “I’ve never sensed anything in Australian culture about giving up or throwing in the towel.”

Delegates at The Belfry have enjoyed the irony nevertheless. It was not very long ago that policy in British Olympic sport seemed to be to look at Australia and either buy in the expertise or copy it. Now the opposite appears to be the case. The Australian HPP was so specific in its admiration of the British system that it included a case study on British Cycling.

Keen said: “There is a system operating here now, but I am hearing less that we simply imported everything they [Australia] did well and more that they should probably look at what we are doing now.”

The possible decline of Australian Olympic sport should be heeded as a warning to Britain. The rise in Australian performance was built around the success of their home Games in Sydney nine years ago and the same is expected for Britain and London 2012.