Researchers used Australian Bureau of Statistics data to estimate that 663,235 people aged between 45 and 64 were missing from the labour market in 2003 because of ill health.
The study, published in The Medical Journal of Australia, found the cost to Gross Domestic Product (GDP) of the absent employees was some 14.7 billion dollars (10.1 billion US) per year.
"Back injuries, arthritis and mental health disorders accounted for approximately half the missing workers," researcher Deborah Schofield said.
Schofield, who is director of research at Sydney University's Northern Rivers University Department of Rural Health, said heart disease, diabetes and asthma also kept significant numbers of older people out of the work force.
She said as the government dealt with an ageing population, and encouraged older people to remain in the workforce, more attention needed to be paid to the health of workers in their 40s, 50s and 60s.
"It's having a very, very large impact on the economy," she told AFP.
"If we are losing a lot of our national GDP and tax revenue as a result of people not being in the workforce because they are ill, that's something we think is very important to address in terms of economic policy well as health policy."
In September, Australian GDP was forecast to be some 1,046.8 billion US dollars in 2008.
Schofield said it was very likely that the same pattern occurred in other developed countries.
"It is an issue that goes across OECD countries," she said in reference to the Organisation for Economic Cooperation and Development, the main policy forum for developed industrialised countries.