Objective: To review Australian policies on active transport, defined as walking and cycling for utilitarian purposes. To estimate the potential health impact of achieving four active transport policy scenarios. Methods: A policy review was undertaken, using key words to search government websites. Potential health benefits were quantified using a cohort simulation Markov model to estimate obesity and transport injury-related health effects of an increase in active transport. Health adjusted life years (HALYs) gained and healthcare cost savings from diseases averted were estimated. Budget thresholds to achieve cost-effectiveness were estimated for each scenario. Results: There is broad recognition of the health-related benefits of active transport from all levels of Australian government. Modelling results suggest significant health-related benefits of achieving increased prevalence of active transport. Total HALYs saved assuming a one-year effect ranged from 565 (95%UI 173–985) to 12,105 (95%UI 4,970–19,707), with total healthcare costs averted ranging from $6.6M (95%UI $1.9M-11.3M) to $141.2M (95%UI $53.8M–227.8M). Conclusion: Effective interventions that improve rates of active transport may result in substantial healthcare-related cost savings through a decrease in conditions related to obesity. Implications for public health: Significant potential exists for effective and cost-effective interventions that result in more walking and cycling.